Kingdom has a plan to balance oil market

27/09/2016 14:37 AST

Saudi Arabia is profoundly studying developments of the global oil market since August to develop scenarios allow the return of balance between supply and demand and the removal of the oversupplies, according to a source in OPEC.

On the eve of the informal meeting of the Organization of Petroleum Exporting Countries (OPEC) scheduled to take place in Algeria, and on the sidelines of the International Energy Forum conference opens Tuesday, and after OPEC head Qatari Energy Minister Mohammed Al-Sadah announced that the meeting is for consultations, the source confirmed that Iran blocked Saudi efforts by demanding a share of 4.1 million barrels per day.

Iran’s oil production rose to 3.6 million barrels per day after the sanctions against it were lifted.

The source pointed out that a Saudi technical team — in a meeting with an Iranian technical official in Vienna on Friday and in the presence of representatives of Algeria and Qatar and OPEC Secretary General Mohammad Barkindo — suggested that that Saudi Arabia should its production which reached 10.6 million barrels per day in August to 10.1 million, the same level reached by Saudi Arabia in January.

Saudi Arabia has also proposed that a reduction of four percent be distributed relatively on the production of the UAE, Kuwait and others, except for Iran, Nigeria and Libya to be able to produce with its current capacity, a formula guarantees removing the surplus in the market. The source said that Saudi Arabia’s readiness for temporary freeze of production begins from Oct. 1 does not mean preventing countries from investing in its production capacity. It does not constitute final production stakes used in the future as a basis for self-producing states. It is only a temporary arrangement for a year to help the market restore balance and remove surplus, said the source.

Nigeria, Libya, Iran upon this scenario have the right of a full-production-capacity achieved between January and August, with a 5.3 to 6.3 million barrels per day to Iran, 8.1 to 3.2 million to Nigeria, and 390, 000 for Libya.

This means removing 700, 000 to one million barrels per day of supply surplus from the market for a period of years.

After a technical meeting in Vienna, it was clear that Iran is determined to have a share equals to 4.1 million barrels per day, a matter that reflects Tehran tendency to disrupt any agreement during OPEC meeting in Algeria. Iran will be held responsible for any possible decline in oil prices.

OPEC member states will continue consultations until their ministerial meeting in Vienna on Nov. 30. In January, Saudi Arabia received the rotating presidency of the organization from Qatar.

Arab News