Saudi Arabia pulled out of planned talks with non-OPEC nations including Russia as disagreements about how to share the burden of supply cuts stood in the way of a deal to boost prices just days before a make-or-break meeting in Vienna.

OPEC officials were scheduled to meet with non-members including Russia on Monday before a ministerial meeting in Vienna two days later. The meeting was later canceled entirely after the Saudis decided not to take part.

Instead, the group called another internal meeting to try to resolve its own differences, particularly the question of whether Iran and Iraq are willing to cut production, said two delegates, asking not to be identified because the deliberations are sensitive. Saudi Arabia wants an OPEC deal in place before conversations with other producers such as Russia, one delegate said.

The setback suggests that Saudi Arabia remains split from its two biggest Middle Eastern rivals at the Organization of Petroleum Exporting Countries. Iran insists it should be allowed to restore output to pre-sanctions levels, while it remains unclear if Iraq is still disputing the OPEC supply estimates that would provide the basis for any cuts. With less than a week until the crucial ministerial meeting, the refusal of just one major producer to participate could scuttle the whole of the agreement reached in September in Algiers.

"The whole Algerian deal wasn’t clear from beginning and their approach was ‘leave it to later’,” said Abdulsamad al-Awadhi, a former OPEC official for Kuwait who is now an independent analyst in London. Two months after the initial accord "OPEC leaders are confused and the group’s founding members can’t solve differences, but they want to have a deal with non-OPEC. This a tough call."

Brent crude fell in London 3 percent to $47.50 a barrel as of 5:37 p.m. Friday. In New York, West Texas Intermediate fell to $46.42 a barrel.

David Fuller's view

It’s a bit like herding angry cats.  OPEC members plus Russia are not the best of friends, to put it politely, and they don’t trust each other.  Those are big obstacles in the path of any agreement.  Nevertheless, if common sense prevails, they will ‘surprise’ the markets with production cuts, rather than just freezes at record high levels. 

The consequences are not insignificant.  Genuine supply cuts which hold for a few months will push the price of Brent crude oil back above $50, and perhaps higher.  Conversely, if there is no agreement, the $40 region could be retested quickly. 

A rally in the price of oil would provide another opportunity for producers to lock in somewhat higher prices by hedging, because the market remains in contango.   

(See also: How long will the markets soar under Trump? – from The Washington Post)