The word from Vienna is that things are not going well for OPEC. In fact, they are going surprisingly poorly. The Organization of the Petroleum Exporting Countries meets Wednesday, and it was expected that the cartel could reach an agreement to cut back oil production. But the efforts appear to have hit a wall, even as talks continue. Analysts say a deal is still possible, but the odds have fallen with the appearance of disagreement between the major players. The outcome of this meeting is being watched across financial markets because it could set the course for oil prices over the next year. If it fails, the market sees oil in the $30s per barrel in the near future, but if it succeeds, oil could stay above $50 and move higher. Oil was off about 3.5 percent in Tuesday trading, with West Texas Intermediate futures at $45.43 per barrel, and analysts say it could keep falling to around $42 unless a deal emerges.



"We're going to need somebody to go in and rescue it. This could end early tomorrow unless Khalid" — Saudi oil minister Khalid al-Falih — "can come in and restore order, but there's not a lot of time to get it done," said Helima Croft, head of global commodities strategy at RBC. Croft, who is in Vienna, said the delegates are now awaiting the arrival of Al-Falih, and the outcome of the meeting is heavily dependent on whether Iran and Saudi Arabia can agree. "What I hear is kind of crazy. The fear in town is it's Doha redux. Everybody's worst nightmare," she said. In April, OPEC ministers met in Doha, Qatar, amid high expectations they would agree to freeze production, but there was friction between Saudi Arabia and Iran, and there was no deal. Saudi Arabia insisted its rival join the freeze, but Iran held firm to its goal of regaining the market share it lost under economic sanctions on its nuclear program. Saudi Arabia quashed what had looked like a possible deal in Doha in the final hour, and it was believed that Saudi Deputy Crown Prince Mohammed bin Salman made the call himself. But many analysts have said the Saudis are now more intent on a deal because of their planned public offering of Saudi Aramco next year, and the massive remake of the economy, led by the young deputy crown prince. "Once again, it seems (Mohammed bin Salman) has decided Iranian participation in a cut is mandated. If he sticks to that position, it doesn't lift off tomorrow. I think a cut was never on the table for Iran. Is this just a hard-line tactic? Are they trying to get the maximum concession?" said Croft.

Now I'm wondering how ugly it's going to get. They're like a dysfunctional family. They tried to cover up their discord as long as they could. John Kilduff founder, Again Capital

Iran's energy minister arrived in Vienna, warning that his country was not going to make any cuts in production. "We will leave the level of production (where) we decided in Algeria," Iranian Oil Minister Bijan Zanganeh told reporters as he arrived in Vienna on Monday. In fact, Iran upped the ante by demanding that Saudi Arabia take even deeper cuts. Reuters reported that Iran now has written to OPEC saying that Saudi Arabia needs to cut back its output to 9.5 million barrels, a million-barrel-a-day cut. Saudi Arabia had indicated it would cut only half that amount. "Now I'm wondering how ugly it's going to get," said John Kilduff, founder of investment management firm Again Capital. "They're like a dysfunctional family. They tried to cover up their discord as long as they could." Kilduff said oil could quickly touch $40 per barrel if there's no deal, before falling into the $30s. The official posture of Saudi Arabia until this past weekend was that it was hopeful that a deal would get done, and that it was willing to do what it would take to make it happen. But over the weekend, Al-Falih signaled that he believed the oil market could rebalance without a deal, raising flags that the Saudi delegation might change its tone.



We're potentially going to fall apart over 200,000 barrels. This is what it comes down to. We're in the realm of ego … This is kind of lunacy. They're not fighting over a million barrels. Helima Croft head of global commodities strategy, RBC

Iran's Oil Minister Bijan Zanganeh arrives at his hotel ahead of a meeting of OPEC oil ministers in Vienna, Austria, November 29, 2016. Heinz-Peter Bader | Reuters