Sunday 22 January 2017

Saudis could raise oil output again as sparring with old rival Iran returns

Rania El Gamal

Published 06/11/2016 | 02:30

In recent months after Saudi Arabia agreed to support a global oil supply limiting pact, thus raising the prospect that OPEC would take steps to boost oil prices.
In recent months after Saudi Arabia agreed to support a global oil supply limiting pact, thus raising the prospect that OPEC would take steps to boost oil prices.

Old disputes between Saudi Arabia and rival Iran resurfaced at a meeting of OPEC experts last week, with Riyadh saying it could raise oil output steeply to bring prices down if Tehran refuses to limit its supply, OPEC sources say.

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Clashes between the two OPEC heavyweights, which are fighting proxy wars in Syria and Yemen, have become frequent in recent years.

Tensions subsided, however, in recent months after Saudi Arabia agreed to support a global oil supply limiting pact, thus raising the prospect that OPEC would take steps to boost oil prices.

But a meeting of OPEC experts last week, designed to work out details of cuts for the next OPEC ministerial gathering on November 30, saw Saudis and Iranians clashing again, according to five OPEC sources who were present at the meeting and spoke to Reuters on condition of anonymity.

"The Saudis have threatened to raise their production to 11 million barrels per day and even 12 million bpd, bringing oil prices down, and to withdraw from the meeting," one OPEC source who attended the meeting told Reuters.

OPEC headquarters declined to comment on discussions during the closed-door meetings last week. Saudi and Iranian OPEC delegates also declined official comments.

A senior Gulf OPEC source said Saudi Arabia did not say output will rise, rather that it "could" rise. "Saudi doesn't threaten, Saudi Arabia doesn't produce more than the customers need," the source said. "All oil producers could raise their production if there was no agreement, this is a fact."

Oil prices fell on Friday. Brent crude LCOc1 was down 77 cents at $45.58 a barrel.

Saudi Arabia has increased output since 2014 to record highs of around 10.5 million-10.7 million barrels per day and adding extra supply would only worsen the global glut, which has already seen prices more than halving from $115 a barrel since mid-2014.

The Saudi stance followed objections by Iran, which said it was unwilling to freeze its output, the same OPEC sources said. Iran has argued it should be exempt from such limits as its production recovers after the lifting of EU sanctions.

(Reuters)

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