OPEC+ ministers meet on Sunday to hash out a deal on oil production after a last-minute fight with African members threatened to derail the gathering.

A day of side meetings and shuttling between Vienna hotels on Saturday failed to smooth over the unexpected row. The United Arab Emirates is pushing for a change to the way its output cuts are measured, according to delegates. But the UAE’s gain would come at the expense of African countries asked to give up some of their unused quota — a politically unpalatable option for them.

African ministers met Saudi Energy Minister Abdulaziz bin Salman on Saturday and pressure is building on them to give in. The African ministers are due to huddle again on their own on Sunday morning before the main event, according to one delegate.

Just two months after the group unveiled a surprise cut, an additional reduction is being discussed, though it’s not a done deal, delegates said. Weak economic data from China and recession fears are weighing on oil prices, which fell 11% in May.

Festering in the background is the war in Ukraine and its impact on oil markets. Sanctions have redrawn the oil map and OPEC ally Russia is now sending more oil to Asia, competing with Saudi Arabia in its traditional market. What’s more, there’s little sign that Russia is delivering the production cuts it has promised.

Key Developments:

• A production cut is one option being discussed by the group, according to delegates. One delegate said no cut was still the most likely outcome, however.
• A cut of as much as 1 million barrels a day is most likely result, says RBC’s Helima Croft
• Bloomberg, Reuters and the Wall Street Journal have been barred from attending the headquarters for the meeting. Reporters continue to interview delegates on the sidelines.

(Time stamps are local time in Vienna)

African Quota Row (7:45 a.m.)

The OPEC+ group’s African members are being pressed to give up unused portions of their output targets in order to redistribute them to the UAE, which has long pressed for a higher baseline for its own production. Rising production capacity in Abu Dhabi, the largest of the emirates, was not reflected in the original starting points for output cuts agreed in 2020. This has long been a issue for the Saudi ally, which has pushed repeatedly for a higher share of the group’s overall output target.

Four out of the five west African OPEC members are unable to meet their output targets, with their combined production in May more than 800,000 barrels a day below the volume they are permitted to pump. Angola and Nigeria, in particular, have struggled to meet their output targets almost since they were introduced three years ago.

But even if they can’t fully utilize their output quotas, the African nations may be unwilling to give them up. Several of them are seeking new investment to boost production in coming years and none will want to relinquish the right to use that new capacity when, or if, in comes online. The Saudis will need to find some way to encourage OPEC’s west African countries to play ball.

Oil Market Wobble (7 a.m.)

To cut, or not to cut, that’s the question facing the OPEC+ ministers gathering in Vienna today. A week ago a roll-over of existing output targets had seemed the most likely outcome. But things have shifted in the past seven days. Markets wobbled, with US crude dipping below $70 a barrel before recovering at the end of the week. Concerns over the strength of recovery in China’s oil demand are weighing on market sentiment, while production from several members of the producer group is higher than expected. That, combined with the Saudi oil minister’s warning that oil’s short sellers should “watch out,” has raised the prospects for an output cut.

Russian Production

In the background at this meeting is a question over Russian production.

There is no sign of Russia’s promised 500,000 barrel a day output cut in the country’s exports — and that’s what matters to the global market. Three months in, crude shipments in the four weeks to May 28 were more than 1.4 million barrels a day higher than they were at the end of last year and 270,000 barrels a day up on February, the baseline month for the pledged reduction. Overseas shipments of refined products have fallen, but by less than they normally do at this time of year. And refinery runs, which typically drop for seasonal maintenance, have rebounded in late May.

Smiles All Around (Saturday)

OPEC’s top two Persian Gulf exporters, Saudi Arabia and the UAE, emerged from Saturday’s gathering with a shining display of unity - their respective ministers clasping hands and adorned with smiles as they stepped from the secretariat building into the Viennese sunshine. Still, each has their own priorities and for Abu Dhabi that involves getting their expanded production capacity formally recognized by the OPEC quota system with a higher output baseline. Whether they get that acceptance may determine the fate of today’s negotiations.

--With assistance from Fiona MacDonald and Nayla Razzouk.