Saudi Arabia will propose a deal to balance oil markets, including challenging demands on Opec members Iran and Iraq to limit production growth, as well as the involvement of non-Opec producers such as Russia, media reported.
Energy Intelligence said Saudi Arabia will call for a cut in output of 1 million barrels per day next year by Opec states, but only if other members and non-members such as Russia, Mexico, Oman and Kazakhstan were prepared to commit to a coordinated effort.
Saudi Arabia would consider the cut only if a number of conditions were met, and the output reduction would not be agreed at the Opec meeting on Friday in Vienna, according to the report, in Energy Intelligence’s International Oil Daily publication.
The Saudi Arabian oil minister Ali Al Naimi is in Vienna with other oil ministers.
Within Opec, the Saudis would want Iraq to freeze production levels at current volumes of about 4 million bpd, while Iran, which expects western export sanctions to be lifted early next year, would also need to participate in the effort.
When asked about media reports of a new Saudi proposal, the Iraqi oil minister Adel Abdel Mahdi said he was willing to have an open discussion.
Analysts said the proposal would be challenging to agree to by all involved parties, which have diverging views on which producers should cut or limit production.
Oil markets rose slightly, although traders remained cautious.
“The market will want to hear from other parties and to have greater assurance that it looked a possibility. Not only that they [the other producers] agree to do it but also that they stick by the agreement,” said Ric Spooner, chief analyst at CMC Markets in Sydney. “The fact that Saudi Arabia has put out a proposal certainly gives it a bit more significance.”
Benchmark crude futures moved away from near 2015 lows on reports of the Saudi plan, with internationally traded Brent up 60 cents by 05.38 GMT at US$43.09 per barrel and US crude up 49 cents at $40.43.
The senior Opec delegate quoted in the Energy Intelligence report said that such a deal, even if agreed, would not take effect at or directly following the Opec ministerial meeting, but that it may be achieved in 2016.
It would, however, be a first sign that Saudi Arabia, which has so far resisted any intervention, is willing to compromise after oil prices more than halved to under $45 per barrel since June last year on soaring production around the world.
Oil prices have tumbled in the past year as Saudi Arabia, Russia and the US boosted output. Opec decided in November last year and again in June to keep its production quotas unchanged, after exceeding its target of 30 million barrels per day in each month since June 2014.
Saudi Arabia, along with key Middle East allies who all have low oil extraction costs and high cash reserves to deal with a period of low prices, has been resisting calls to cut production in support of prices, while other more cash-strapped Opec members such as Venezuela and Iran have been demanding a cut in production from larger producers to prop up the market.
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