As if plunging equity futures were not enough for traders to worry about this morning, in the past two hours oil, which had rebounded heading into this week's 2-day OPEC meeting, tumbled sharply, dropping as much as 5%, with WTI sliding as low as $50.23 - less than a dollar from this year's low of $49.41 - from above $53/barrel earlier in the session as Saudi Arabia said producers were working towards a deal to cut output that could fall short of market expectations. Brent crude fell 4.2% to $58.99 a barrel.

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Saudi energy minister Khalid al-Falih told reporters ahead of today's critical closed-door meeting of oil ministers in Vienna that OPEC and allies outside of the cartel including Russia were still working towards reaching an agreement by Friday.

Falih said Saudi Arabia’s preference was for a "sufficient cut but not overly large", adding that a 1 million barrels a day "would be adequate", but noting that "there is no deal yet." He may have been remembering Trump's tweet from yesterday, and realizing that if the US president gets angry with his boss, and de facto real OPEC leader, Crown Prince MbS, things could get much worse.

The kingdom also called for contributions from all countries, saying that the deal should be "fair and equitable" and should include Russia, as well as countries that were exempt from previous deals, such as Libya and Nigeria.

Quoted by the FT, when asked if a pact might not be reached, he said all options were on the table, but added that Russia, the largest oil producer in OPEC+ but slightly behind the US, and seen as crucial to reaching a deal, had “made a promise” to cut.

Oil has crashed more than 30% since its October peak as the US issued sanctions waivers to big buyers of Iranian oil, while production from global producers surged. The planned output cuts come despite pressure from US president Donald Trump, who has advocated for high levels of production, describing lower oil prices as a “tax cut” for consumers.

So what would be needed to stop the latest oil rout? According to energy analysts on Wall Street, any cut less than 1mmb/d will likely not help oil much, to wit (via Bloomberg): OPEC+ would need to cut by 1.5m b/d for crude to rise to $70 a barrel, according to Rystad. Saudi Arabia needs to pledge a reduction in supply of more than 500k b/d, Petromatrix says, while Saxo Bank says prices could fall if curbs don’t exceed the 1m b/d level.

Rystad

• OPEC+ needs 1.5m b/d output cut for crude to rise to $70/bbl
• “A cut announcement that effectively removes anything less than 1 million b/d of 2019 supply would be interpreted negatively by the market”
• OPEC+ would need to cut by almost 2m b/d to give the market a bullish surprise

Petromatrix

• Saudi Arabia needs to agree to a cut in supply of more than 500k b/d to be meaningful
• Decision could be seen mostly as a "packaging effort" if Saudis don’t cut by more than 500k b/d
• “A total cut of about 1 million b/d, with a cut of 0.5 million b/d for Saudi Arabia would not be much different than what is already priced in the physical market”

Saxo Bank

• OPEC and Russia must cut more than 1m b/d to avoid crude prices falling
• “The current sentiment in the market is so poor that any disappointment could send oil sharply lower”
• The U.S.-China “trade war ceasefire seems to have been broken already and that raises some questions about demand”

CIBC

• OPEC+ cut of 1.5M b/d could push crude into backwardation
• Present contango reflects oversupply to end of 2019
• Cut of 1m b/d would fall short of balancing global oil markets

B. Riley FBR

• Expectations are for a cut of 1m-1.3m b/d
• If daily output is only curbed by 750k b/d or less, the market will “come down”