“Oil prices are rising because of the talk that Saudi Arabia will propose a global deal to balance the market”, Frank Klumpp, oil analyst at Stuttgart-based Landesbank Baden-Wuerttemberg, said.
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“In order for there to be a cut in production, non-OPEC (exporters)must participate, Iraq has to participate, and the Iran output picture has to be clear”, a senior OPEC delegate told the Financial Times. “It’s our right and nobody can limit us to do it and we will not accept anything in this regard and we don’t expect our colleagues in OPEC to put pressure on us to continue sanctions against Iran”.
Saudi Arabia is “being hit from all angles, facing direct challenges from Russian, Iranian and Iraqi crudes”, according to a Thomson Reuters Oil Research and Forecasts special report published on Thursday.
Jim Krane, an energy specialist at Rice University’s Baker Institute, says that policy is unlikely to change when OPEC meets Friday in Vienna.
“We don’t think cutting output is viable”, Novak told reporters in Moscow in response to questions about a report that Saudi Arabia would consider lowering oil production next year if certain non-OPEC countries follow suit.
“Any lingering speculation of an oil production cut from OPEC’s official 30m barrels per day quota is likely to be disappointed, as Saudi Arabia seems content to wait for lower non-OPEC supply and stronger demand to lift prices next year”, said analysts at Capital Economics.
Ilham Shaban said that the decision in connection with the decline in oil production will be made at the OPEC meeting on 4 December.
However, the Gulf countries’ strategy has not yet paid off completely, as there is still too much oil in the market and prices remain low.
OPEC sources and analysts said the reported Saudi proposal would be hard to agree, as Iraq is struggling to balance its budget despite soaring output and Iran has long argued its market share was stolen by rivals during the years of sanctions. This oversupply is the main reason why global stockpiles of crude have continued to build despite prices halving since last June.
“It is very hard to cut 1-million barrels a day collectively”.
Its return is seen as a way for the resource-rich country to access cheaper oil supplies as local demand soars while domestic production falls. That same month, OPEC’s 12 members produced about 31.5 million barrels per day, 1.5 million barrels above target.
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Such a cut would be conditional on the participation of non-OPEC producers including Russia, Mexico and Kazakhstan and wouldn’t be agreed on Friday, according to the report. But Saudi Arabia, the biggest oil exporter, is intent on keeping production elevated until higher-cost producers cut back, with USA shale producers chief among them. “Obstacles to an agreement to cut production appear insurmountable”.
