Russia, Iran, and Iraq have quashed a plan reportedly being eyed by Saudi Arabia to lift sagging global oil prices through collective cuts in oil output.
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The Organization of the Petroleum Exporting Countries will likely decide to roll over oil production at its meeting on Friday, sources said, with Saudi Arabia telling other members it has no intention of floating a proposal for curbing output.
When the Saudis, or anybody else, talk about an output cut, what they really mean is targeting the oil that flows to Asia from the Middle East and Russian Federation.
“No action will be decided as there is a huge disagreement among members, even bigger now as oversupply is no longer mainly coming from Gulf delegates, but from Iran, who is willing to fight to recover its market share”, the source briefed by one of the OPEC ministers said.
Venezuela is proposing taking 1.5 million barrels a day of production out of the market.
OPEC abandoned production quotas for individual members several years ago and most members have been producing as much as they want.
A report in newsletter Energy Intelligence suggested this week the Saudis might be ready to fine-tune policies and could start pushing for a global deal to curb supply in order to avoid oil prices remaining low for longer.
Jessop added: “However, if the target is left at 30 mbpd, oil prices might jump as this would imply that Indonesia’s contribution will have to be offset by reductions in production by other OPEC members (Other OTC: UBGXF – news) “.
“By cutting production, it will force the price of oil up through $50 and the USA will flood the market”, Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney, said by phone.
Faced with dismay among members unable to balance their books, Saudi Arabia has adopted a conciliatory tone, promising to listen to all before a policy decision is made. OPEC watchers said the divisions make it more likely the group will re-affirm its current production ceiling of 30 million barrels a day on Friday.
According to a survey by Bloomberg, OPEC production in November rose to an above-target 32.1 million barrels per day (mbpd). Oil strategists and government officials from the 12 OPEC nations met in an informal gathering at a hotel in the Austrian capital city, a day ahead of the group’s official meeting. Senior oil official Amir Hossein Zamaninia said last week his country hopes to bring an extra 500,000 barrels on the market by early next year.
U.S. benchmark West Texas Intermediate (WTI) for delivery in January was up 28 cents at $41.36 and Brent crude for January was trading 26 cents higher at $44.10.
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“If someone cares about the market’s disorder and low oil price, they should pressure those countries which have taken Iran’s production share, instead of ignoring the legitimate sovereign right of a country with their comments and then [asking] the country which has been subject to unfairness to voluntarily continue the unfair restrictions against herself like before”, Zanganeh told oil ministry news service Shana.
