Oil’s in for a bruising after Saudi Arabia threatens to amp up output
Reports that Saudi Arabia threatened to sharply raise oil output at an Opec meeting have caused oil to plunge, testing $44.19 (the late September low).
Clashes between Saudi Arabia and rival Iran have caused yet more headaches for Opec. Sources told Reuters that at a meeting of Opec experts last week, Riyadh threatened to raise oil output steeply to bring prices down, should Tehran refuse to limit its supply.
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The two Opec heavyweights have been sparring a great deal in recent years, though tensions had eased somewhat in recent months after Saudi Arabia agreed to support a global oil supply limiting pact; raising the prospect that Opec would take steps to boost oil prices.
And at the meeting which was supposed to iron out details of cuts for the next Opec ministerial gathering later this month, Saudis and Iranian butted heads again. The Saudi threat came after objections by Iran resisting freezing its output. Iran thinks it should be exempt from such limits as it production recovers following the lifting of EU sanctions.
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Opec HQ declined to comment on discussions going on during the closed-door meetings.
It's a particular trouble for Opec, as previous gains in prices had developed on hopes of a possible deal throughout the year. It promised to deliver a production cut.
Saudi Arabia has increased output since 2014 to record highs of around 10.5m-10.7m barrels per day; adding to that would only worsen the global glut. Prices have more than halved from $115 a barrel since mid-2014.
An Opec delegate at the meeting, told Reuters he was still optimistic a deal could be reached this month.