Saudis Said To Offer Oil Production Cut If Iran Freezes Output, Reuters Reports

With oil rolling over, and modestly pressuring US equity futures, moments ago Reuters did what it does best, and reported, citing three "anonymous" sources, that Saudi Arabia was prepared to engage in a radical shift in its long-held policy of not cutting production, and has offered to lower its own oil production if Iran agrees to cap its output this year, in "a major compromise" ahead of talks in Algeria next week, "three sources familiar with the discussions told Reuters."

Reuters adds that "the offer, which has yet to be accepted or rejected by Tehran, was made this month, the sources told Reuters on condition of anonymity" and notes that Riyadh is ready to cut output to lower levels seen early this year in exchange for Iran freezing production at the current level, which is 3.6 million barrels per day, the sources said.

“They (the Saudis) are ready for a cut but Iran has to agree to freeze,” one source said.

As Reuters further adds, the first source did not say by how much Riyadh would cut if Iran agreed to freeze at 3.6 million bpd, which has been the OPEC nation's output for the past three months.Riyadh's production has spiked since June due to summer demand, reaching a record high in July of 10.67 million bpd and edging down to 10.63 million bpd in August. From January to May, Saudi Arabia produced around 10.2 million bpd.

Two sources said Saudi Arabia's Gulf OPEC allies the United Arab Emirates, Qatar and Kuwait were expected to contribute to any reduction if an agreement were reached.

According to UBS oil analyst Giovanni Staunovo; “the answer from Iran is still pending, so there is no agreement yet,” adding that “considering where Saudi production stands, it’s a smart move to say they’re willing to cut production.”

Needless to say, if accurate, this would mean that Saudi Arabia is prepared to throw in the towel on its strategy first unveiled almost two years ago, in the November 2014 OPEC meeting.

The report took place moments after Bloomberg reported that OPEC delegates from Saudi Arabia and Iran ended oil-production discussions after 2-day meeting in Vienna. As a reminder, as of yesterday evening, Saudis and Iranians hadn’t reached an agreement, and yet Reuters wants oil-trading algos to believe that the production cut proposal had been floated well before the Vienna preparatory meeting.

We expect this latest attempt to manipulate the price of oil higher to fizzle shortly, whether with an official denial, by Iran rejecting the "offer" or otherwise, but for the time being WTI spiked higher by 80 cents on the news, and after dipping in earlier trading is now green, trading at $46.40 at last check.

Comments

No comments yet! Be the first to add yours.