Oil jumps on Saudi proposal to cut output
KINGDOM PROPOSES OUTPUT CUTS BUT IRAN, RUSSIA REJECT IDEA
Oil prices rose from near-2015 lows yesterday after a report sourced to a senior Opec delegate said Saudi Arabia would propose a deal to balance oil markets with non-Opec help next year.
Benchmark Brent crude futures were up $1.01, or 2.4 per cent, at $43.50 a barrel by 1320 GMT. US crude was trading 76 cents higher at $40.70 a barrel, after sinking below $40 on Wednesday.
Saudi Arabia, which has so far resisted any market intervention to prop up oil prices, will propose the Organisation of Petroleum Exporting Countries (Opec) cut output by 1 million barrels per day (bpd) next year, Energy Intelligence reported. A Saudi oil source said the report was “baseless”.
An Opec production cut would only go ahead if nonmembers like Russia, Mexico, Oman and Kazakhstan commit to joint action, the senior delegate was cited as saying. Opec ministers are gathering in Vienna for their policy meeting today.
“Oil prices are rising because of the talk that Saudi Arabia will propose a global deal to balance the market,” said Frank Klumpp, oil analyst at Landesbank Baden-Wuerttemberg.
Iran’s oil minister was quick to dismiss the possibility of limiting Tehran’s production ramp up once Western sanctions are lifted.
Saudi Arabia appears to have floated the idea of a global deal to balance oil markets and lift prices from around the lowest levels in six years although fellow producers Iran and Russia yesterday rejected its main idea of cutting output.
Saudi Arabia, the largest oil producer in the Organisation of Petroleum Exporting Countries (Opec), might propose members cut oil output by 1 million barrels per day next year if non-Opec countries joined in, industry publication Energy Intelligence reported.
A Saudi source said later the report was “baseless” but declined further comment and a source at Energy Intelligence said it stood by its story.
Saudi Arabia has long insisted it would cut production only if fellow Opec members and non-Opec countries joined in. The report quoted a senior Opec delegate as saying the Saudis would agree to cuts if Iraq freezes production rises and Iran and non-members such as Russia, Mexico, Oman and Kazakhstan contribute.
Any cooperation between Opec and non-Opec producers to tackle low oil prices would be the first since they joined forces 15 years ago to help the market recover from the 1998 financial crisis. Since then top non-Opec producer Russia has repeatedly resisted calls for joint action and grown its output by 70 per cent.
Russia, along with important Opec member Iran, which wants to increase output after years of Western sanctions, looked unlikely to change position.
Opec will hold a policy meeting in Vienna today after informal talks took place yesterday.
“We do not accept any discussion about increases of Iran production after the lifting of sanctions. It is our right and anyone cannot limit us to do it. We will not accept anything in this regard,” Iranian oil minister Bijan Zangeneh told reporters in Vienna.
Not fair
“And we do not expect out colleagues in Opec to put pressure on us ... It is not acceptable, it’s not fair.” Iran will raise production by up to 1 million barrels per day following years of forced curbs because of the sanctions over its atomic programme, he added.
Russian oil minister Alexander Novak told local news agency RIA that he saw no need for Moscow to decrease oil production, adding that he did not expect Opec to change output policies at its meeting today.
Saudi Arabia has been the main driver of Opec’s current policies to pump record volumes of crude to push higher cost producers, such as newcomers tapping into US shale, out of the market.