Saudi Arabia, along with its allies in the Persian Gulf announced their willingness to reduce oil production if producers in Russia, Iraq and Iran will do the same.
The announcement came before the 168th meeting of the Organization of the Petroleum Exporting Countries (OPEC), which is set to happen this week. Two of the world's biggest oil powerhouses, Iran and Saudi Arabia, are expected to have a showdown at the meeting. The two countries have rivaled for Middle East's political influence.
In 2016, the western sanctions on crude oil production are planned to be lifted, leading Iran to tell Saudi Arabia to reduce its oil production levels while the former prepares to ramp up its export operations.
"We cannot cut alone. Everyone has to contribute to that - Iran, Iraq, and the rest outside OPEC," said a Gulf official.
The 168th OPEC meeting is expected to be one of the most aggressive meetings to date. In 2014, Saudi Arabia placed OPEC on a new course where oil countries pumped more oil despite spiraling prices. The move was a historic departure for the world's third largest oil producer with history of keeping the oil supply low enough in order to encourage higher prices.
"Saudi to propose one million bpd cuts ... if ... Iran, Iraq and #OPEC join cuts. In other words won't happen. Whoever does cut will lose market share," tweeted senior trader Assad Tannous from the Asenna Wealth Solution.
While Saudi Arabia is not expecting a formal deal during the OPEC meeting this week, they are hoping that an agreement could be implemented by 2016, said Energy Intelligence.
Oil productions in the U.S. are starting to climb new heights. Saudi Arabia stressed the higher importance of keeping its market share than supporting prices. For majority of 2015, Saudi Arabia has produced over 10 million barrels of oil daily. Saudi Arabia's oil-pumping record, along with those from Iraq keeps OPEC at nearly full capacity. However, these massive productions contributed to plummeting prices due to the global supplies overtaking the global demand. Daily, oil production overtakes the oil demand by 0.5 to two million.
Photo: Paul Lowry | Flickr
