Oil prices have rallied by over 3.5%
Oil prices have rallied by over 3.5%, reversing most of yesterday's 4%-plus decline. The rally was sparked by remarks from Iran's oil minister, who said earlier, as he headed to OPEC's meeting in Vienna, that he was "optimistic" of the group agreeing on an output cut plan. A press conference is scheduled for 15 GMT (10 ET). The cartel is looking to trim production to 32.5-33.0 M barrels per day, down from prevailing record levels of 33.8 M barrels per day. This was provisionally agreed at a meeting in Algiers in late September. OPEC members will now attempt to finalise this by agreeing on how the cut will be spread between oil producing nations. Here is where there are potential sticking points, particularly with Iran and Iraq. The FT reported on Monday that Saudi Arabia offered to trim its production by 4.5%, but this is contingent on both Iran freezing its production at 3.8 M barrels per day, and on the participation of non-cartel producers, including Russia. Assuming a deal is reached, markets will scrutinise it to see if it is credible or merely cosmetic. A no-deal outcome would greatly damage OPEC's credibility and likely lead to a rout in crude prices.