Saudi Ara­bia floats ideas for higher OPEC out­put

The Daily Star (Lebanon) - - BUSINESS - By Grant Smith, Javier Blas and Elena Mazneva

Saudi Ara­bia has floated sev­eral oil out­put hike plans to fel­low OPEC mem­bers, in­clud­ing one with a twostep in­crease, as they seek ways to nar­row dif­fer­ences with Rus­sia and the rest of the car­tel, ac­cord­ing to peo­ple briefed on the dis­cus­sions.

The ideas, dis­cussed in­for­mally among min­is­ters and del­e­gates ahead of next week’s meet­ing in Vi­enna, comes as Riyadh tries to rally sup­port for a pro­duc­tion in­crease in the face of staunch op­po­si­tion from Iran, Venezuela and Iraq, and pres­sure from Wash­ing­ton, the same peo­ple said, ask­ing not to be named dis­cussing pri­vate con­ver­sa­tions.

Rus­sian Pres­i­dent Vladimir Putin and Saudi Ara­bian Crown Prince Mo­ham­mad bin Sal­man are due to meet in Moscow Thurs­day to dis­cuss oil pol­icy on the side­lines of the open­ing match of the Foot­ball World Cup.

Rus­sia, the lead­ing mem­ber of a group of coun­tries al­lied to OPEC, has pro­posed a deal that would put about 1 mil­lion bar­rels a day into the mar­ket as quickly as pro­duc­ers could ramp up pro­duc­tion, ac­cord­ing to a per­son fa­mil­iar with the coun­try’s think­ing.

Of­ten oil min­is­ters float ideas in­for­mally to gauge sup­port, only to change tack as ne­go­ti­a­tions progress. It’s un­clear whether Riyadh would press ahead with any of the plans it has sug­gested when min­is­ters meet next week.

Saudi Ara­bia is mulling dif­fer­ent sce­nar­ios to raise pro­duc­tion over the com­ing months by be­tween 500,000 bar­rels a day and 1 mil­lion bar­rels a day. One pro­posal en­vis­ages a sin­gle hike of just 500,000 bar­rels a day. An­other idea would see an im­me­di­ate in­crease of 500,000 bar­rels, fol­lowed by a sim­i­lar rise in the fourth quar­ter.

The king­dom has also shared ideas with in­creases of around 600,000 to 700,000 bar­rels a day.

In con­trast, Saudi Ara­bia and sev­eral other OPEC mem­bers, in­clud­ing the United Arab Emi­rates and Kuwait, and non-OPEC na­tion Oman would pre­fer a grad­ual pro­duc­tion boost to avoid up­set­ting the oil mar­ket.

The two-step pro­duc­tion hike could help to smooth the im­pact of an in­crease. Some Arab coun­tries have sug­gested call­ing an ex­tra­or­di­nary meet­ing in Septem­ber or Oc­to­ber to take stock of the mar­ket.

The king­dom sig­naled it wants to boost out­put to ease con­sumer anx­i­ety

Saudi Ara­bia last month sig­naled it was ready to boost out­put in the sec­ond half of the year to ease con­sumer anx­i­ety about higher prices, a pol­icy U-turn for the king­dom that only weeks ear­lier ad­vo­cated for pro­duc­tion re­straint. “I think in the near fu­ture there will be time to re­lease sup­ply,” Saudi En­ergy Min­is­ter Khalid al-Falih said at the St. Peters­burg In­ter­na­tional Eco­nomic Fo­rum in Rus­sia in late May.

The change in Saudi tone came af­ter ma­jor oil con­sum­ing na­tions, in­clud­ing the U.S., In­dia and China, com­plained about ris­ing fuel prices.

U.S. Pres­i­dent Don­ald Trump on April 20 took to Twit­ter to lam­baste the car­tel’s push for higher prices.

“Looks like OPEC is at it again,” the pres­i­dent tweeted. “Oil prices are ar­ti­fi­cially Very High!”

“The fact that Saudi Ara­bia wants lower prices in the near term is be­com­ing in­creas­ingly ob­vi­ous,” Am­rita Sen, chief oil an­a­lyst at En­ergy As­pects Ltd. in Lon­don, said in a note to clients.

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