With oil prices entering a bear market last week, tumbling 21% from recent highs as it became clear that Trump will significantly water down Iran oil export sanctions by granting waivers to its 8 largest clients even as US inventory stockpiles are once again rising amid almost weekly records in US oil production, OPEC and its non-OPEC allies - which is pretty much everyone except US shale producers - are starting to sweat, and during today's meeting in Abu Dhabi they hinted that an oil output cut to limit excess production may be coming.

Speaking to reporters, Oman’s Oil Minister Mohammed Al-Rumhy said that "a number of global producers agree they should pump less oil in 2019, and a reduction of 1 million barrels a day would be a good number" according to Bloomberg. Others echoed his sentiment, floating a range of cutbacks, however the most often cited number was a decrease in output by as much as 1 million barrels a day, roughly the amount of Iranian oil production that is expects to continue flowing thanks to the recent sanction waivers.

"I think probably there is support that right now there is too much oil in the market and stock, inventories are building up," Al-Rumhy told reporters today in the UAE capital.

Oman min says a 1 million cut would be a good start #OOTT #opec — Amena Bakr (@Amena__Bakr) November 11, 2018

Of course, OPEC can not be seen as responding to every political whim in the White House, especially if it will result in higher gasoline prices and an angry Donald Trump, so a technical committee representing the coalition framed the need for a production cut in the context of its projections according to which the global oil surplus - which hit unprecedented levels in 2015 - will resurface in 2019 if they continue pumping at current rates, according to delegates cited by Bloomberg. Nonetheless, Saudi Arabia’s Energy Minister Khalid Al-Falih - clearly cognizant of the political risks of Riyadh being singled out as the reason for the next oil price spike - said ahead of Sunday’s meeting in Abu Dhabi between OPEC+ member that it was “too premature” to discuss cutting output.

Even so, he hinted that it was only a matter of time before the Saudis agreed, and while he hedged that OPEC+ "won’t respond to weekly oil market gyrations", and that "it’s too early to talk about oil cuts" Al-Falih also noted that a "gradual trend of rising stockpiles is emerging" and will "cut output if persistent glut emerges."

While Kazakhstan’s deputy energy minister, Magzum Mirzagaliev, also shared the prevailing production cut sentiment telling reporters that a production cut in 2019 by the OPEC+ producers cannot be ruled out, so far biggest OPEC+ member - Russia - was not ready to disclose its position on whether the group should reduce output further before the committee’s meeting, according to a person familiar with the matter.

One day earlier, the Saudi energy minister "agreed in a meeting in Baghdad on Saturday on joint coordination with Iraq to achieve more stability in the oil market." Meanwhile, Iraq, OPEC’s second-largest producer after Saudi Arabia, has announced ambitious plans to keep expanding its output capacity.

Separately, the OPEC+ Joint Technical Committee, which met for talks ahead of Sunday’s meeting, announced a 104% compliance rate to its cuts deal in October, once again largely the result of Venezuela's involuntary "banana republic" production reduction. Producers exceeded output targets in September with 111% compliance, and agreed to boost supply by restoring compliance to 100 percent.

What is ironic is that just a few weeks ago, with uncertainty over Iran's sanctions looming, OPEC+ was scrambling to assure the world it can produce more, not less. The International Energy Agency had called for OPEC to open the taps to ensure global demand for crude is met, with its Executive Director Fatih Birol speaking of the market entering "a red zone" if output losses from Venezuela and exports from Iran are not offset.

Funny, then, that just in the span of a few weeks, we went from a "red zone", to a radioactive "green" one, and with producers ramping up output rapidly since May, responding to pressure from U.S. President Donald Trump and making up for supply losses from Iran and Venezuela, "now, they’re considering a U-turn."

And sure enough, the Oman oil minister, just a month after saying the opposite, now claims that "there’s too much in the market, and we’re going to go back where we were if we’re not careful."

It's not just the Iran wildcard: record U.S. shale output is adding to what is already an oversupplied market, complicating the challenge for OPEC and its allies which unsuccessfully tried to cripple US oil producers in 2014 by flooding the world with oil, resulting in a historic plunge in crude prices. Fast forward to today, when U.S. production rose last week to a record 11.6 million barrels a day, and stockpiles rose by 5.8 million barrels. Meanwhile, OPEC’s output in October reached the highest level since 2016, while Russia last month pumped 11.4 million barrels a day, a post-Soviet record.

And while few mention it, an even greater concern than excess supply is dropping demand, as a result of the surging dollar which has crushed demand for the USD-denominated black gold in emerging-market economies, while the trade war between the U.S. and China has sent Chinese GDP to a decade low.

What happens next? As Bloomberg suggests, if the group does decide fresh cutbacks are necessary, it would mark its second production U-turn this year. And most comically, for the world's biggest oil exporters Saudi Arabia it would be the third time in recent years that the kingdom has delivered a supply surge only to quickly reverse it. "Comically" because on Sunday Falih said that "we won't respond to weekly oil market gyrations" when that precisely what OPEC+ does all the time.

Furthermore, as Bloomberg's Javier Blas demonstrates, "the last three times that Saudi Arabia has lifted oil production significantly, it had backfired:"

At the end of the day, As Reuters' John Kemp writes, OPEC's policy options are the same as in late 2014:

Cut production to try to maintain higher oil price but concede market share to U.S. shale producers

Maintain production and accept lower price to defend market share, curb U.S. shale output and boost consumption growth

So until OPEC decides, it is currently inbetween Stage 6 and 7 of OPEC:

Despair (low prices forever?) Cautious hope (prices start to rise) Boom (prices and revenues surge) Denial (rising prices not our fault) Acceptance (we can and will boost output) Concern (volatility is unhealthy) Regret (uh oh …)

Finally, while the Saudis will face a challenge in obtaining the support of "rival-turned-partner" Russia, which has less need for high oil prices, in cutting production, the biggest risk will be antagonizing Trump, who has repeatedly accused the group of inflating prices, and who - already contemplating Saudi sanctions and halting the refueling of its fighter jets in Yemen - will likely see any Saudi act resulting in higher oil prices as a provocation and demand another pound of flesh from the embattled middle eastern kingdom.