OPEC nations from Venezuela to Iran are asking Saudi Arabia to reduce its oil output, however the country has said it will only do so if countries outside the organisation do the same. Venezuela and Ecuador want OPEC to agree to output curbs on 4 December when members meet in Vienna, officials said. Iran has called on the group to trim production to accommodate its own output increase next year.
Energy Intelligence reported that Saudi Arabia, which has so far resisted any market intervention to prop up oil prices, may suggest a production cut of 1 million bpd from 2016. This commitment however would be on the conditional that it included the participation of non-OPEC producers including Russia, Mexico and Kazakhstan, according to the report.
No producers outside OPEC have given any indication they would agree to such an arrangement, even though Saudi Arabia has expressed willingness to cooperate with producers outside OPEC in order to stabilise the oil market.
OPEC sources and analysts said the Saudi proposal would be difficult to agree as Iraq is struggling to balance its budget even despite soaring output and Iran has long argued its market share was stolen by rivals during the years of sanctions.
Iranian Oil Minister Bijan Zanganeh has said that OPEC shouldn’t wait for non-members to collaborate before reducing its own output. "We are OPEC and it is not rational to hold our decision subject to the reaction of the non-OPEC producers," he said.
Brent crude, the global benchmark, closed on Wednesday at US$42.49/bbl, the lowest since the 2008 - 2009 financial crisis. It traded at US$43.08 as of 8:59 am GMT in London on 3 December. US crude was trading US$0.41 higher at US$40.35/bbl after sinking below US$40 on 2 December. International oil traders including Vitol Group have said rising stockpiles will continue to weigh on the market and prices may not rally until 2017.
"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 Stuttgart-based Landesbank Baden-Wuerttemberg.
Oil market investors have expected OPEC to maintain its strategy of keeping output high in an attempt to defend market share. A spokesperson for Barclays said, "We expect the OPEC meeting...to be a non-event, and member countries are unlikely to agree on any production cuts." The brokerage cut its forecast for Brent and US crude price by US$3 to US$60 and US$56/bbl.
Edited from various sources by Francesca Brindle
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