Saudi Arabia eyes plan to boost oil price by reducing output

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, Iraq and Russia yesterday rejected its main idea of cutting output.

Opec holds its formal policy meeting in Vienna today.

Saudi Arabia, the largest oil producer in the Organization of the Petroleum Exporting Countries, might propose members cut oil output by 1m 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. Oil prices rose slightly even though analysts said a global deal would be hard to reach.

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.

The proposal, if confirmed, would suggest Saudi Arabia is looking to fine tune the approach it took last year when it abandoned a policy of managing the market.

Any co-operation 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 70%.

Iran also wants to increase output after years of Western sanctions looked unlikely to change position.

“We do not accept any discussion about increases of Iran production after the lifting of sanctions,” Iranian oil minister Bijan Zangeneh told reporters in Vienna.

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 later today.

Iraq, which saw a spectacular rise in 2015 output, was also keeping its production plans. US output has decreased over the past year but other producers such as Russia remained more resilient. As a result oil prices more than halved in the past 18 months.

For Saudi Arabia, reduced oil revenue is also causing some of the business class to push Riyadh to quickly find an end to its expensive war in Yemen.