Saudi Arabia has thrown down a challenge to big rival oil producers ahead of this week’s Opec meeting, saying it would back output cuts as long as they were supported by countries both inside and outside the cartel.
The kingdom, the Organisation of Petroleum Exporting Countries’ (OPEC’s) de facto leader, has set a high bar for a deal that is unlikely to be met by the time of Friday’s meeting in Vienna, but it leaves open the possibility of an agreement in 2016.
The move indicates a further softening in tone from the world’s largest oil exporter which led the cartel’s landmark shift in policy a year ago, arguing that keeping the taps open would pressure high-cost rival producers. Opec’s strategy shift upended the oil industry and triggered the biggest price slump in at least a decade.
A senior Opec delegate said there was no question of Saudi Arabia lowering its production without backing from Iraq and before Iran’s full return to international markets. Cooperation from producers outside of the cartel, such as Russia, would also be needed. Moscow has repeatedly rejected calls to join output cuts and has raised production to record levels.
“In order for there to be a cut in production non-Opec must participate, Iraq has to participate and the Iran output picture has to be clear,” the delegate said.
Energy Intelligence, a specialist industry publication, said Saudi Arabia would back a co-ordinated cut of 1m barrels per day next year – the equivalent of just over 1 per cent of global oil supply – if Opec members Iran and Iraq agreed to limit production alongside Russia, the biggest exporter outside the producer group.