The odds on cheaper petrol prices for the Christmas holidays just got better as OPEC talks in Vienna ended without a deal on oil production cuts.
Crude oil prices slumped as much as five per cent in initial trading this morning.
The crude oil price surged so much this year it sparked fears about petrol heading towards $3 a litre. Then it crashed so hard we are now more likely to see it below $2 a litre by Christmas.
Oil prices peaked in early October, which coincided with a fall in the kiwi dollar and new fuel taxes to hit drivers in the pocket.
But in a dramatic market shift - which caught many traders off guard - oil prices have slumped in the past two months.
They have fallen as much as one third since a peak on October 3.
The kiwi dollar has also bounced back - up about 7 per cent since the start of October.
Drivers have already enjoyed 12 petrol price cuts since a peak in October, but there were more to come, says market analyst David Lewis of Milford Asset management.
"Part of the reason that the price got so high was concerns about sanctions on Iran and a reduction of supply out of Iran," he said. "Then more recently we've seen Trump encouraging Saudi Arabia to continue producing at a higher level to try and keep that oil price down."
Trump wants a lower price to support the US economy and had quite a bit of leverage right now in the wake of the revelations about Saudi involvement in the murder of journalist Jamal Khashoggi, Lewis said.
But a 30-40 per cent swing in the oil price as we'd seen in the past few months was unusual, he said.
After the OPEC meeting Saudi Energy Minister Khalid Al-Falih said he wasn't confident of an agreement after discussions of a 1 million million-barrel-a-day output reduction concluded without an agreement.
That left the oil market dangling in uncertainty although non-OPEC allies join the group for a second day of talks tonight.
Earlier on Thursday, ministers were discussing a proposal to curb their oil output by about 1 million barrels a day, which would go a little further than Saudi Arabia's preference for a moderate reduction that wouldn't shock the market. Delegates said details of how to share that out and the extent of the contribution from non-OPEC allies remained unresolved.
The group is under pressure after a collapse in oil prices last month. Saudi Arabia, the largest producer in the cartel, is seeking to walk a fine line between preventing a surplus and appeasing President Donald Trump.
Achieving that balance was proving elusive, with one delegate predicting that the size of output cuts would remain unresolved until Friday, when allies including Russia join the talks.
Oil in London (Brent Crude) tumbled as much as 5.2 per cent to $58.36 a barrel, before paring losses to $59.34 .
Saudi Arabia, OPEC's de facto leader, has made clear that it won't shoulder the burden of trimming production alone.
Its cooperation with Russia shows how much OPEC has changed since 2016 when the two countries ended their historic animosity and started to manage the market together.
But OPEC is also contending with vociferous opposition from the US president, who's taken to using his Twitter account to berate the group's policies and sees low oil prices as key to sustaining America's economic growth.
While ministers met in OPEC's Vienna headquarters on Wednesday, Trump tweeted that the "world does not want to see, or need, higher oil prices!"
Iran is currently subject to U.S. sanctions and as such won't participate in any curbs, the country's Oil Minister Bijan Zanganeh said. Whether to exempt Iran from making any cuts was one sticking point in the meeting, said a delegate. OPEC ministers are also discussing whether to exempt Libya and Venezuela from making production cuts, another delegate said.
The last time the OPEC+ group agreed to curtail output, in late 2016, it settled on a combined 1.8 million-barrel-a-day reduction. In preparatory meetings ahead of this week's summit, delegates had said a cut of as much as 1.3 million barrels a day next year is needed as demand growth slows and U.S. shale production surges.
Resolving the group's internal differences and convincing a skeptical oil market that they're serious about preventing a new supply glut in 2019 would require ministers to conclude weeks of debate and settle on a final figure.
- Additional reporting Washington Post