Saudi considers surprise oil production cap ahead of OPEC meeting

Saudi Arabia is discussing plans to restore a production target scrapped in December ahead of Thursday’s OPEC meeting in Vienna, according to reports.

Sources told Bloomberg that talks had taken place but no formal proposal had been made.

Energy Aspects chief oil analyst said options under discussion included a new ceiling of 32 million barrels a day, close to the 32.4 million the group is estimated to have produced in April.

“Contrary to market speculation, Saudi Arabia is open to cooperation,” Sen said in a report, according to Bloomberg.

However, any deal will likely depend on Iran, which has resisted previous attempts to cap production.

Saudi Arabia insisted Iran participated in an oil production freeze discussed at a meeting between OPEC and non-OPEC producers in April, resulting in the deal being scrapped.

Speaking after his arrival in Vienna, Iran’s oil minister Bijan Namdar Zanganeh said he would prefer individual quotas for members rather than an overall production ceiling.

Yesterday he told state-owned Tasnim News Agency that the country had doubled its oil exports since the last OPEC meeting in December 2015, following the lifting of nuclear-related sanctions against the country.

Iran’s oil production returned to pre-sanctions levels in April, reaching 3.56 million bpd, according to the International Energy Agency.

Tasnim said Iran’s crude exports also stood close to levels seen before sanctions in November 2011 at 2 million bpd

The change in tone from Saudi Arabia, may reflect the need of new oil minister Khalid Al-Falih, who was appointed to the position last month, to start his tenure with a successful meeting, Bloomberg said.

Read: Saudi replaces oil minister in big reshuffle of economic posts

Analysts also speculated that a ceiling would show OPEC was still important to the oil market after some had declared the organisation effectively dead.

Last month, only one of 27 analysts surveyed by Bloomberg said they expected an output target from OPEC’s meeting.

The meeting comes as oil prices hover close to $50 a barrel, a significant recovery from 12-year lows earlier in 2016.

Read: Oil hits $50 for the first time in 2016

UAE Oil Minister Suhail Al Mazrouei told reporters yesterday that market forces should govern prices.

“The market will fix itself to a price that is fair to the consumers and to the producers,” he said.