Saudi Arabia is finding it difficult to convince fellow OPEC members and Gulf allies on the need to raise oil output, sources said on Wednesday, adding to complications ahead of an OPEC meeting this week, Reuters reports.
The Organization of the Petroleum Exporting Countries meets on Friday to decide on output policy amid calls from major consumers such as the United States and China to cool down oil prices and support the global economy by producing more crude.
Iran said on Tuesday OPEC was unlikely to reach a deal, setting the stage for a clash with Saudi Arabia and Russia, which are pushing to raise production steeply from July to meet growing global demand.
Adding to the complications is a lack of compromise among usually aligned Gulf oil producers ahead of the Friday meeting, according to two sources familiar with the talks.
Traditional Saudi allies – the United Arab Emirates, Kuwait, Oman and Bahrain – believe Saudi Arabia was too quick to respond to U.S. calls for higher production, and have been rattled by Riyadh’s close coordination with non-OPEC Russia, sources said.
There are different views on how much to increase production and whether such a move should be gradual, one source said following a meeting of Gulf oil ministers on Tuesday evening.
Russia has proposed OPEC and non-OPEC raise output by 1.5 million barrels per day (bpd), effectively wiping out existing production cuts of 1.8 million bpd that have helped rebalance the market in the past 18 months and lifted oil to $75 per barrel. Oil was trading as low as $27 in 2016.
OPEC members Iran, Iraq, Venezuela and Algeria have opposed a relaxation of production cuts, fearing a slump in prices.
But OPEC could still agree a last-minute deal on Friday by compromising on a lower output increase below 1 million bpd, OPEC sources have said.
A decision to increase output could be taken with Iran refusing to sign up, as has happened before in OPEC.
Iran has so far been the main barrier to a deal, with Oil Minister Bijan Zanganeh saying on Tuesday OPEC should not yield to pressure from U.S. President Donald Trump to raise output.
He said Trump had contributed to the rise in prices by imposing sanctions on OPEC members Iran and Venezuela, which will likely lead to lower exports.
Zanganeh said he would leave Vienna on Friday even before OPEC holds talks with non-OPEC producers the next day, but efforts were underway on Wednesday to convince Iran to participate in a deal.
Sources said Saudi Arabia did not want to be seen as putting too much pressure on Iran and hence Russia could instead try to convince Tehran.
Zanganeh was due to attend a ministerial committee on Thursday, two sources said. Iran is usually not part of the committee, which includes Russia, Saudi Arabia, the UAE, Oman, Kuwait, Algeria and Venezuela.
Iraqi Oil Minister Jabar al-Luaibi said on Wednesday he hoped there would be agreement when OPEC meets but added: “The oil market has not reached the level of stabilization.”
Frontpage October 15, 2019