VIENNA (Dispatches) -- Saudi Energy Minister Khalid al-Falih met with U.S. special representative for Iran Brian Hook in Vienna on Wednesday, sources familiar with the meeting said.
Hook, a senior policy adviser to U.S. Secretary of State Mike Pompeo, met with Falih a day ahead of an OPEC meeting in Vienna which is due to debate oil production cuts.
"We categorically deny such a meeting took place," a Saudi Oil Ministry spokesperson said.
The encounter, first reported by Reuters, was just one of many meetings for the kingdom’s top oil official. He continued through the morning to haggle with counterparts from Russia, Iraq and the United Arab Emirates over the size of potential output cuts.
Yet it illustrates the extent to which the White House has inserted itself into OPEC’s decision-making process under the Saudi submission.
The U.S. and Saudi Arabia have been discussing the availability of oil -- sometimes privately, sometimes via Twitter -- ever since President Donald Trump announced in May that he wanted to choke Iran’s oil exports to a trickle to pressure it to reopen nuclear negotiations.
In June, the Saudis opened the oil taps to offset losses from Iran, raising output by more than 1 million barrels a day since then to a record 11.02 million last month. Then in November the U.S. unexpectedly granted sanctions waivers to many of Iran’s biggest customers, contributing to the biggest monthly crude-price slump in a decade as fears of a shortage turned into predictions of a glut.
The extent to which the market is well supplied next year will depend in large part on whether talks between OPEC and its allies, in which al-Falih will play a decisive role, result in an agreement to cut production.
U.S. President Donald Trump has urged Saudi Arabia to refrain from output cuts in order to keep oil prices low.
Iran is carefully monitoring the next steps by some OPEC members and their allies which have "arbitrarily” ramped up oil production, leading to a crash in prices.
They are to meet in Vienna on Thursday and Friday toward a deal to reduce output, but Iran's OPEC governor Hussein Kazempour Ardabili believes an agreement is unlikely to be reached.
Saudi Arabia, which has boosted its exports under pressure from the United States in recent months, is reportedly pushing for steep reductions in output from January, but Iran views it a political gimmick.
Ardabili says any meaningful cuts in production must be made by the countries which have pumped above their quotas in breach of a 2007 deal between OPEC and non-OPEC oil producers.
The deal is monitored by the Joint OPEC/Non-OPEC Ministerial Monitoring Committee (JMMC), which is dominated by Saudi Arabia and Russia.
Ardabili said the committee has unilaterally allowed certain members to produce above their quotas since May despite being "obliged to inform other OPEC members of any change in production and secure their consensus.”
According to the official, some OPEC members with "political motivations” and non-OPEC members motivated by an urge to get a better market share sharply increased production, which led to a $30 drop in oil prices from their highest point.
The move has frustrated many producers, prompting Qatar to announce that it was quitting OPEC to focus on gas in a swipe at Saudi Arabia.
Ardabili said other smaller OPEC members are likely to go Qatar’s way.
"If some producers with limited capacity face a request for reduced production while they have no chance or capacity to increase output, there is the likelihood of further drop in membership by African and Latin American members,” he said.
Qatar has said it will attend the upcoming Vienna meeting and abide by its commitments, but the cooperation agreement between OPEC and non-OPEC producers runs out this month.
Ardabili said if the deal is to be extended, current production numbers should be changed, which he saw unlikely.
He chided "those members which have not only had no benevolent effect but have had a destructive role in recent months and become a political tool for certain members against Iran.”
"The cooperation agreement is unlikely to be renewed or at least some member states will not join it, in which case any renewal will be out of the question,” Ardabili said.
So far, OPEC members have lost $9 billion in total against $2.7 billion earned by the producers which have increased their production, he said.
"Hence, the five or six countries which have benefited from the situation should slash their output by 1.4 million to 1.8 million barrels per day at the minimum in order to return prices to an upward trajectory. But to reach such a consensus is highly unlikely.”
Ardabili said Saudi Arabia and Russia are likely to propose the cutting to be undertaken by all members and then blame them for lower prices which they have caused themselves.
"Another view is that a cut in production may be accepted by some members, but their commitment would not be absolute and high.
"This could give a political signal to the U.S. that ‘if you give Iran wavers, we will cut production’,” the official said.
"In other words, the main beneficiaries of the rise in production namely Saudi Arabia, Russia, Iraq and the UAE are virtually telling the U.S. to intensify the sanctions or they will reduce production,” Ardabili said.
"This is an issue which, from the political point of view, we are taking note of and carefully following,” he added.