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Saudi oil minister suggests Opec oil cartel would keep its production ceiling at 30m barrels per day

Some Opec members want producers outside the cartel to shoulder some of the responsibility for balancing the oil market by essentially cutting their output Photo: AP

Oil slumped on Wednesday as expectations that Opec will cut production faded following dovish remarks by cartel kingpin Saudi Arabia, which could signal the beginning of a price war.

Speaking on the sidelines ahead of Thursday's critical meeting of the Organisation of Petroleum Exporting Countries (Opec) in Vienna, Saudi oil minister Ali Al-Naimi said: "The market will stabilise itself eventually".

His remarks were interpreted by the market as a signal that the cartel would keep its production ceiling at 30m barrels per day (bpd), which sent the price of crude lower.

Brent crude - a global benchmark comprised of a blend of high-quality oil from 15 North Sea fields - fell 1.3pc to $77.30 per barrel after Mr Naimi's comments, before recovering to trade flat at $78.29 by late afternoon. Brent crude has fallen 30pc since June.

Crude traded in the US fell to as low as $74 per barrel as traders bet that Opec will allow the price to fall further amid growing signs of a global price war amid producers.

"There remains little prospect of any production cut being agreed at [Thursday's] Opec meeting," said brokers at Commerzbank. "Opec will merely agree to comply better with the current production target of 30m bpd.

Iranian officials, traditionally seen as hawks within the cartel of mainly Middle East producers, also appeared to soften their position following an afternoon of closed door meetings with counterparts from Saudi Arabia and Kuwait.

Bijan Zanganeh, Iran's oil minister, told reporters after leaving the talks that Iran was now "close" to the Saudi position, heading into Thursday's final discussion at the Opec secretariat.

Rafael Ramirez, Venezuela's Opec representative, had tried to galvanise support for production cuts to restore oil prices to around $100 per barrel, after talks with senior Russian oil officials on Tuesday delivered no immediate sign of a consensus.

Although Russia is not a member of Opec's 12 nations, the country is a major oil producer and has expressed concerns over falling prices. Russian oil minister Alexander Novak said on Wednesday that he thought Opec would not cut its output levels.

Major Opec nations, Russia and US shale oil drillers now appear on the brink of a price war as these three giant producing blocs fight for a greater share of global demand. Although Opec states enjoy the lowest average production costs - in some cases around $2 per barrel - they have increasingly lost ground in North America, which remains the world's largest consumer of oil.

Some Opec members now want producers outside the cartel, including Russia and the US, to shoulder some of the responsibility for balancing the market by essentially cutting their output. UAE energy minister Suhail Al-Mazrouei said on Wednesday that Opec alone was not responsible for the stability of the oil market.

"This is not a crisis that requires us to panic," he said.