Saudi Arabia discussed oil output cut with traders ahead of Opec
Kingdom sought views on likely market reaction should deal fail
Saudi Arabia convened private talks with the world’s largest oil traders in Vienna before Opec’s crunch meeting on whether to cut oil output, seeking views about the likely market reaction should they fail to clinch a deal, it has emerged.
Mark Couling, head of crude oil at Vitol, the world’s biggest independent oil trading company, was invited to Vienna by the Saudi delegation, according to people with knowledge of the talks.
Pierre Andurand, who runs the $1.5bn Andurand Capital fund, one of the world’s biggest oil hedge funds, was also invited, alongside at least one trader from Russian independent oil company, Lukoil.
The meetings between Saudi Arabia and the traders came just a day before Opec’s official talks in Vienna last week, which saw the cartel reduce production by more than 1m barrels a day in an attempt to end a two-year price rout that has hit oil producers’ economies — the first such supply deal since 2008.
While Saudi Arabia routinely gives private briefings to energy analysts in the days leading up to an Opec meeting, it is rarer, but not untoward, for the kingdom to call together the traders responsible for shipping millions of barrels of oil or trading thousands of futures and options contracts.
Saudi delegates have previously done so on occasion when they were looking to get a better feel for the market, said one person who has been attending Opec meetings for more than a decade.
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The talks highlight the deep concern within the Saudi camp right to the last minute, despite months of shuttle diplomacy between Opec members, with the world’s top oil exporter worried about further price falls if they failed to secure a cut.
Brent, the international oil benchmark, did fall 4 per cent on Tuesday as the market bet that a deal was slipping beyond Opec’s reach. Prices then rocketed more than 15 per cent between Wednesday and Friday after Opec members reached an output reduction deal.
Mr Couling and Mr Andurand attended a meeting with the Saudi delegation on Tuesday morning, before the kingdom’s oil minister Khalid al Falih arrived in Vienna, people familiar with the meeting said. A trader from Litasco, Lukoil’s trading arm, also attended, they said.
Lukoil did not respond to a request for comment. Vitol and Andurand declined to comment.
Mr Andurand declined to comment on the meetings, but said in an earlier interview that he had been betting on rising prices since January and had not changed his position.
At the meetings, the Saudi delegation expressed caution about the likely outcome of the Opec gathering, warning that a deal to reduce output to try and bolster the price was still in doubt, according to sources familiar with the conversations.
Gulf delegates had earlier given similar warnings, with many saying a deal could be imperilled by lingering tensions between Saudi Arabia, Iran and Iraq.
Saudi oil officials sought to play down the talks, with one delegate said it was “not unusual” for them to talk to participants in the oil market.
“These discussions are a part of ongoing consultations we have with analysts, producer companies and traders particularly around Opec meetings and throughout the year,” the Saudi delegate said.