oil fields
Oil fields (representational image)

A possible output cut deal among oil producers caused a nosedive in crude oil prices on Friday as markets await the outcome of the talks.

Saudi Arabia, the top oil exporter of the Organisation of the Petroleum Exporting Countries(OPEC) has decided not to take part in talks between the OPEC and non-OPEC oil producing countries about a possible oil cut, reports the Xinhua news agency. Nigeria and Libya have also decided not to take part.

OPEC’s aim is to increase oil prices from their current historic low levels.

The downward spiral in oil prices has forced the oil producing countries to consider a possible cut in production.  According to CNBC reports, oil prices have been trading at historic lows given an oversupply in the market. Brent crude traded at $35 a barrel early in the year and though it has rebounded to about $45, the oversupply is expected to remain a drag throughout 2017. The production of shale oil in the U.S., Iran’s attempt to increase oil exports and sluggish growth in advanced economies are the other factors bringing oil prices down.

A preliminary agreement was reached in September by the OPEC members to cut crude oil output in order to stabilise global oil prices. Another meeting is scheduled in Vienna, Austria, on Nov. 30.  If passed, the agreement will be the first of its kind since 2008, The Indian Express reported.

Reuters reported that OPEC members will debate an output cut of 1.2 million barrels a day, but Iran, Iraq and Indonesia have shown reservations to such a proposal.

“It’s the first time since November 2014 that OPEC members meet to try to control oil prices,” Colin Smith, head of oil research at Panmure, told CNBC over the phone.

“We believe there is a 70 percent chance that OPEC could announce a 1 million barrel of oil per day production cut on next Wednesday, 30 November, during the cartel’s formal meeting in Vienna,” Nomura said in a research note.

The aim is to increase oil prices by at least $2 per barrel of oil and if this happens then even a production cut will benefit the oil-producing nations.