Saudi Arabia conditionally proposes 1 million bpd reduced output for 2016

Once sanctions are lifted, Iran wants to immediately ramp up production by 500,000 barrels per day and by another 1 million barrels more by the end of 2016.

Saudi Arabia would consider the cut only if a number of conditions were met, and the output reduction would not be agreed at the Opec meeting on Friday in Vienna, according to the report, in Energy Intelligence’s International Oil Daily publication.

While Iran would listen to any Saudi proposals, “it is not rational to hold our decision subject to the reaction of the non-OPEC producers”, Zanganeh said.

Zanganeh said the aim was to first increase output by half a million barrels a day beginning early next year, eventually rising to one million barrels extra which will bring its daily total to around 3.8 million.

At 1200 GMT, US benchmark West Texas Intermediate for delivery in January rose 68 cents to $40.62 a barrel, from Wednesday’s close. Prices were already showing signs of dropping at 7:00 a.m. on Wednesday, trading at $41.68 per barrel, which is down 17 cents from its last settlement and down more than 10 percent since the start of November.

“Russia is going full out and we’re expecting Iranian production to increase in the coming year”, Hodge said. Since cartel heavyweight Saudi Arabia continues to suggest it is not in favour of a production cut, the market appears to be pricing in a no-change scenario at OPEC.

Some traders said the market could be volatile for the rest of the week and that short covering could occur as Brent and WTI both approach technically oversold levels.

“The Saudis are in no mood to do Iran any favors right now”, said Jason Bordoff, a former national security and energy adviser to President Obama who is currently director of the Columbia Center on Global Energy Policy. (ECA – Get Report) shares are increasing on Thursday as oil prices were leaping on the weaker dollar and on reports that Saudi Arabia may take action to try and stabilize oil markets.

Smaller nations are expected to put further pressure on Saudi Arabia to reduce oil production levels later today when cartel members meeting in Vienna.

Iran on Thursday strongly rejected reported calls by some OPEC peers to delay a decision to increase its oil production after the sanctions against the country are removed.

Despite Thursday’s gains, the oil market remains heavily oversupplied, underscored by an unexpected weekly buildup in USA inventories.

One possible scenario is for OPEC to recognize the fact that members are pumping wells in excess of the formal ceiling, raising the group’s collective quota from 30 million bpd to 31.5 million bpd, in line with the current volumes.

He noted the huge drop in oil prices within the last three years where crude oil went from United States dollars 112 and 100 per barrel in 2012 to USD 45 or less pb in 2015.