The aim is to reduce production by a million barrels a day, from the current level of 33.82 million barrels.
Less than 24 hours to go until the decisive Wednesday OPEC meeting, not only is Iran refusing to cut its own oil production, but it is also defiantly and boldly "offering" to Saudi Arabia to cut its crude output to 9.5 million bpd.
As oil ministers start to head to Vienna for the meeting, Saudi Arabia's oil minister Khalid Al-Falih has already raised the prospect a deal won't be struck, or that it'll be a supply freeze rather than a cut.
Saudi Arabia's Falih was not expected to land before Tuesday evening (Wednesday AEDT), leaving little time for traditional pre-meeting discussions with peers. Market fundamentals, in terms of supply and demand, have begun to improve. Russian Energy Minister Alexander Novak said late last week that the Russian Federation is ready to participate in freezing production, but nothing more than that.
Goldman Sachs, one of the most active banks in oil trading, said it saw prices averaging $45 a barrel until mid-2017 even without any OPEC deal and added the market was likely to move into a deficit in the second half of 2017. Prices spiked as Iraq's oil minister said the country would cooperate with the group to reach an agreement "acceptable to all".
OPEC to debate output cut; Iraq, Iran may balk
This, as much as poor production discipline among OPEC producers, will likely cap oil price increases in 2017. That would imply a supply cut of more than 1.2 million barrels per day, according to Reuters calculations.
"I think that OPEC will reach some kind of agreement this week".
So far, however, motorists haven't seen much relief from the low oil price: Government figures show average fuel prices have reached their highest since July a year ago, at 116.6p for petrol and 119p for diesel.
A preliminary agreement was reached in September by the OPEC members to cut crude oil output in order to stabilise global oil prices. That would probably trigger a crash in oil prices to below $40 a barrel, according to analysts such as Thomas Pugh of Capital Economics.
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. "It could still imply an OPEC production level considerably in excess of 33 million bpd, depending on developments in Libya and Nigeria and the speed and rigor of compliance", David Hufton, managing director of brokerage PVM Oil Associates Ltd. wrote in a note.
However, as the bank noted, experience in recent months shows that this is unlikely, especially since Libya and Nigeria are likely to grab every opportunity to raise their now subdued production to a more normal level.