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Crude prices up on report of proposed Saudi oil deal

FILES - The logo of the OPEC (Organization of the Petroleum Exporting Countries) is seen on the eve of an OPEC meeting in Vienna, Austria on December 3, 2013. OPEC gathers in Vienna on December 4, 2015 to decide on whether to trim the cartel's oil output faced with a global supply glut, sliding prices and weak demand growth. AFP PHOTO / ALEXANDER KLEIN

FILES - The logo of the OPEC (Organization of the Petroleum Exporting Countries) is seen on the eve of an OPEC meeting in Vienna, Austria on December 3, 2013. OPEC gathers in Vienna on December 4, 2015 to decide on whether to trim the cartel's oil output faced with a global supply glut, sliding prices and weak demand growth. AFP PHOTO / ALEXANDER KLEIN   | Photo Credit: ALEXANDER KLEIN

Saudi Arabia wishes to propose OPEC cuts output by 1 mln bpd, and wants Iran, Iraq and non-OPEC producers to join cuts, but Saudi Arabia does not expect formal deal this week.

Crude prices inched up on Thursday on a report suggesting that Saudi Arabia will propose a deal to balance oil markets. This is the first sign that the top OPEC producer is willing to compromise after a rout that has more than halved oil prices since June 2014.

The U.S. crude was trading 29 cents higher at 40.23 dollars per barrel at 10.45 p.m. (IST) on Thursday, while internationally traded Brent was up 48 cents at 42.97 dollars.

Saudi Arabia, which has so far resisted any intervention, will propose a cut of 1 million barrels per day (bpd) in the OPEC output, Energy Intelligence reported, citing a senior OPEC delegate.

"The market will want to hear from other parties and to have greater assurance that it looked a possibility," said Ric Spooner, chief market analyst at Sydney's CMC Markets.

"Not only do the other producers have to agree to do it, they also have to stick by the agreement." The OPEC's top producer, Saudi Arabia, wants non-OPEC counties such as Russia, Mexico, Oman and Kazakhstan to participate in the deal.

But it will be challenging to get all parties to agree, given diverging views on which producers should cut or limit production.

"Saudi to propose 1 million bpd cuts if Iran, Iraq and the OPEC join cuts. In other words won't happen. Whoever does cut will lose market share," Asenna Wealth Solutions' senior trader Assad Tannous wrote in a tweet following the news.

Saudi Arabia does not expect a formal deal to be reached this week, but would like the agreement to be implemented next year, Energy Intelligence reported.

The OPEC's historic decision last year to maintain high output to defend market share from other producers such as Russia and U.S. shale drillers, sent oil prices into a spiral.

The OPEC is set to meet in Vienna on Friday to discuss its policy at a time when a global glut shows no signs of abating. The U.S. crude inventories rose for a 10th straight week, climbing 1.2 million barrels, contrasting analysts' expectations of a fall, data from the U.S. Energy Information Administration showed on Wednesday.

Additionally, oil product supplies are also building as warmer-than-usual weather in the U.S. northeast, a major market for heating oil, limits demand. Distillate stockpiles climbed by 3.1 million barrels last week, the EIA said, far exceeding expectations of a gain of 326,000 barrels.

The Oil production already exceeds demand by 0.5 to 2 million barrels per day.

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Printable version | Mar 30, 2020 3:07:48 AM | https://www.thehindu.com/business/crude-inches-up-on-report-of-proposed-saudi-oil-deal/article7944502.ece

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