OPEC probably needs to slash production by at least 1 million barrels per day to stabilise prices. While that's not likely to happen, Reuters reported yesterday that "market players" are saying oil prices could plunge to $60/bbl if the Organisation of Petroleum Exporting Countries does not agree on a significant output cut when it meets in Vienna this week.

While the global energy industry "collectively holds its breath" ahead of the meeting, oil markets are sceptical OPEC will act to halt the collapse that drove prices to a four-year low - not least of which the hedge funds.

US Commodity Futures Trading Commission data showed that money managers had reduced net-long positions in West Texas Intermediate by 4.1% in the week ended November 18, with long positions sinking to an 18-month low.

London-based Yardeni Research said this morning most of the oil price decline occurred after Saudi Aramco started a price war on October 1 for all its exports, reducing those bound for Asia to the lowest level since 2008.

Bloomberg said the move suggested that the biggest member of OPEC was prepared to let prices fall rather than cede market share by paring output to clear a supply surplus.

"Saudi Arabia has acted in the past to stop a plunge in prices. It made the biggest contribution to OPEC's production cuts of almost 5 million barrels a day in 2008 and 2009 as demand contracted amid the financial crisis. The kingdom would need to reduce output about 500,000bpd to eliminate the supply glut now stemming from the highest U.S. output in three decades."

Iran's semi-official news agency Mehr reported on Sunday that ministers from Iran would seek an output cut from Saudi Arabia at Thursday's meeting of OPEC.

OPEC is responsible for about 40% of global oil output, exceeded its 30 million barrel target for a fifth month in October according to Bloomberg data; while the International Energy Agency said on November 14 that global consumption would slip by about 1% in the first quarter.

Yet a seachange is emerging. The combined oil production of the US and Canada rose 900,000bpd to a record 12.7MMbpd over the past five months, well exceeding that of both Saudi Arabia (9.6MMbpd) and Russia (10.6MMbpd).

Meanwhile, the slightly negative oil demand growth of the 34 OECD members' advanced economies over the past six months has prompted demand to drop to its slowest rate since May 2012 - 0.8% yoy. OMI data says there's no recovery in Western Europe, where demand is still falling, especially in France, Italy, and the UK. Also still falling, despite Abenomics, is Japan's demand, which was down 4.1% yoy.

Matt Loffman of Douglas-Westwood Houston said that while Saudi Aramco was cutting differentials for US refiners earlier this month was a clear sign it is competing for US market share, calls for the Kingdom to cut production were not so clear cut.

While intra-OPEC competition is nothing new, Loffman said this latest reaction of the Saudis highlighted the difficulty the group will have in agreeing production figures, even among the founder members.

"Producing at the top of the cost curve and in domestic crisis, Venezuela is crying out for a higher price," Hoffman said.

"Reliance on oil revenues in Iran, Algeria, Nigeria and Ecuador is likely to inspire these countries to push for production cuts; while the heavyweights in the Gulf will sense an opportunity to defend or expand market share. In the first group, $115/barrel is required to balance budgets and support social programs but Qatar, the UAE and Kuwait can cope with $75/bbl."

This urgency was reflected on Monday when Bloomberg reported Iran may propose OPEC cut its output by 1 million barrels a day to halt the slide.

UAE's energy minister Suhail Al Mazrouei, meanwhile, tweeted on Sunday that producers, particularly those pumping crude from shale formations, "shall be concerned as we are in OPEC" about the stability in crude markets, and about finding a sustainable balance between supply and demand.

Saudi Foreign Minister Prince Saud Al-Faisal met Russian Foreign Minister Sergei Lavrov in Moscow last Friday, and the two countries - the world's two biggest oil exporters - said in a joint statement they would coordinate on "issues" affecting the energy and oil markets, but didn't give away anything more.

Speculation is mounting that Saudi Arabia has over-extended itself, with growing domestic commitments not helped by concern around an expanding population of under 25s maturing in the middle of social and political upheaval in the region.

"Can the Saudis withstand lower oil prices? Yes, but not without absorbing revenue cuts in the dozens of billions of dollars per year," Hoffman said.

"The more important question might ask whether the Saudis can cope with production cuts."

If history teaches us anything, he called the policy to cut production to drive up prices between 1980 and 1986 "disastrous" for the Saudis. Crude exports fell by more than 70%, OPEC supply was replaced by development and production in other geographies.

"Lessons learnt from this episode would suggest that while a $75 price is sub-optimal, the priority for the Kingdom must be to remain the crucial oil exporter," Hoffman said.

"Would a coordinated production cut be possible across OPEC members? History suggests this will be challenging to agree and more difficult still to enforce. Whether this is ultimately plays into the hands of non-OPEC producers will be of further concern.

"Oil is a cyclical business and the industry has begun to prepare for a period of lower prices and capital discipline.

"Some important indications of the length and depth of this period will come out of Vienna on November 27.

"In the meantime, the anxious looks in the direction of Dhahran will continue."