ABU DHABI (Reuters) – Saudi Arabia is discussing a proposal that could see OPEC and non-OPEC oil producers cut production to 1 million barrels per day, two sources told Reuters on Sunday, while the main oil exporter in the world is grappling with a fall in oil prices.
PHOTO PHOTO: Flames are visible at the Saudi Aramco Shaybah Oilfield production plant in the Empty District, Saudi Arabia on May 22, 2018. REUTER / Ahmed Jadallah / File photo
The sources said that any such agreement would depend on factors, including the level of Iranian exports after the United States imposed sanctions on Tehran, but allowed the main Iranian oil companies to renounce the purchase of oil.
Riyadh was surprised by the exemptions granted to customers such as China and India, a move that hit oil prices, at least three sources of industry and OPEC told Reuters.
Now Saudi Arabia wants to take action to prevent a further fall in prices that has fallen below $ 70 a barrel on Friday and is leading discussions on cutting oil production next year, sources said.
Under an agreement to expire at the end of the year, OPEC and non-OPEC producers have agreed to limit production by around 1.8 million barrels per day.
But the producers ended up cutting more – partly due to unforeseen interruptions in Venezuela, Libya and Angola – and so agreed in June to limit the cuts to the agreed level, which means restoring an output of about 1 million bpd.
OPEC and its allies will meet in Vienna on 6-7 December to decide on the output policy for 2019.
"There is a general discussion on this (cut), but the question is how much it is necessary to reduce the market," said one of the sources in view of a meeting held by a monitoring committee in Abu Dhabi, in the presence of main producers of Saudi Arabia and Russia.
"Nobody expected exceptions, Saudi Arabia wants to at least put in oil prices, nobody wants a free fall in prices," the source added.
Kazakh Deputy Minister of Energy Magzum Mirzagaliyev told reporters in Abu Dhabi that he understood that Saudi Arabia suggested using August-October production levels as a basis for determining the cuts.
Friday's Brent LCOc1 crude fell 47 cents, or 0.7 percent, to settle at $ 70.18 a barrel. It lost about 3.6% during the week and lost more than 15% this quarter. [O/R]
Washington has granted 180-day waivers to eight Iranian oil buyers: China, India, South Korea, Japan, Italy, Greece, Taiwan and Turkey. This group employs up to three quarters of Iran's oil exports, commercial data show.
The US administration has promised to reduce Iranian oil exports to zero and US President Donald Trump has put pressure on Saudi Arabia to increase production to cool the market.
Iranian crude oil exports could drop to just over 1 million bpd in November, about a third of their peak in mid-2018. But traders and analysts say the figure could increase as of December as importers use their exemptions.
Saudi energy minister Khalid al-Falih said the kingdom would pump 11 million barrels a month last month, from 10.7 million barrels in October.
He also said that action could be needed to reduce oil stocks after the increases in recent months.
US sanctions against Iran are aimed at curbing Tehran's nuclear and missile programs and its support for the delegation forces in Yemen, Syria, Lebanon and other parts of the Middle East.
Additional reports by Maha El Dahan, Stanley Carvalho, Tuqa Khalid and Nafisa Eltahir; editing by Jason Neely