16 April 2016, Doha — Saudi Arabia’s top oil official, Deputy Crown Prince Mohammed bin Salman, said Riyadh could boost output immediately and almost double it long term, in comments that could threaten the signing of a global production freeze deal planned for Sunday.
The second in line to the throne of the world’s largest crude exporter added in remarks to Bloomberg that the kingdom would only restrain its output if all other major producers, including Iran, agree to freeze their production.
His remarks appeared to cast doubt on a freeze plan to be discussed by producers of the Organization of the Petroleum Exporting Countries and non-OPEC member countries such as Russia on Sunday in the Qatari capital Doha.
Iran, a fellow OPEC member but also Saudi Arabia’s regional rival, said it would not participate in Sunday’s meeting as it could not accept proposals to freeze production.
“We have told some OPEC and non-OPEC members like Russia that they should accept the reality of Iran’s return to the oil market,” Oil Minister Bijan Namdar Zanganeh was quoted as saying by the oil ministry’s news agency SHANA. “If Iran freezes its oil production at the February level, it means it cannot benefit from the lifting of sanctions.”
Yet OPEC delegates told Reuters there was still a chance for a deal on Sunday if participants can find a compromise – and avoid a repeat of the last OPEC meeting in December where Iran and Saudi Arabia clashed over output policy.
The fact that Tehran’s stance has not torpedoed the convening of the meeting suggests fellow producers may be prepared to tolerate a rise in Iran’s output, provided there is no new price rout.
The freeze proposal has helped oil prices to rise over 60 percent from a 12-year low near $27 a barrel hit in January, despite little change to the market’s supply glut.
“I am optimistic,” acting Kuwaiti oil minister Anas Khalid al-Saleh said on Saturday regarding prospects for a deal.
Several sources told Reuters there was support among the producers, including another OPEC delegate who said: “I still think there will be a deal.”
Delegates said a number of approaches were being discussed and there was talk of setting up a committee to monitor compliance.
“We have a deal,” one senior oil source told Reuters, referring to a proposal backed by several producers for an output freeze at January levels that would last until October.
Producers have struggled for nearly two years with low oil prices and an oversupplied market but have been loath to cut output as that would cede market share to rivals.
Sanctions imposed by the United States and other world powers were lifted in January in return for Tehran agreeing to long-term curbs on its nuclear program.
Prince Mohammed said Saudi Arabia would cap its market share at about 10.3 million to 10.4 million barrels a day (bpd), if producers agree to the freeze.
“If all major producers don’t freeze production, we will not freeze production,” he said.
The prince, who has emerged as Saudi Arabia’s leading economic decision-maker, said Riyadh could increase output to 11.5 million barrels a day immediately and go to 12.5 million in six to nine months “if we wanted to”.
If the kingdom chose to increase investment in its oil industry, production capacity could be increased to 20 million bpd, he said in remarks made on Thursday and published on Saturday.
“I don’t suggest that we should produce more, but we can produce more,” said the prince.
It is not clear to which extent his comments reflect the thinking of the Saudi leadership and king. They contrast with mostly conciliatory statements from market players in recent weeks.
Iran’s production has already surpassed 3.5 million bpd and exports are set to reach 2 million bpd next month, Iran’s deputy oil minister was quoted as saying by state news agency IRNA.
*Rania El Gamal, Katie Paul, Parisa Hafezi, Tom Finn, Sam Wilkin, Reem Shamseddine; William Maclean; editing – Jason Neely & Ralph Boulton – Reuters