Arabia has offered to reduce oil production if rival Iran
agrees to cap its own output this year, in a major compromise ahead of talks in Algeria
next week, three sources familiar with the discussions told Reuters
The offer, which has yet to be accepted or rejected by Tehran, was made this month, the sources told Reuters on condition of anonymity.
is ready to cut output to levels seen early this year in exchange for Iran
freezing production at the current level, which is 3.6 million barrels per day (bpd), the sources said.
"They (the Saudis) are ready for a cut but Iran
has to agree to freeze," one source said.
Two more sources confirmed the offer was presented to Tehran.
Riyadh's production has spiked since June due to summer demand, reaching a record high in July of 10.67 million bpd and edging down to 10.63 million bpd in August.
From January to May, Saudi
Arabia produced around 10.2 million bpd.
Two sources said Saudi
Arabia's Gulf Opec
allies, the United Arab Emirates, Qatar
were expected to contribute to any reduction if an agreement were reached.
Arabia, by far the largest producer in the Opec, will shoulder the biggest cut, the sources said.
The proposal can be seen as a shift by Riyadh, which orchestrated the current Opec
policy in 2014 by refusing to cut output alone to support prices and chose to defend market share against rivals, particularly high-cost producers.
A fall in oil prices to $30-$50 per barrel from levels as high as $115 seen in June 2014 led to a boost in global oil demand and a decline in high-cost supplies such as those from the United States.
But the Saudi
strategy caused a rift in the Opec, whose poorer members have faced a budget crisis and unrest. Riyadh
and its Gulf allies also had to tighten their belts after a decade of generous public spending.
As the pain of cheap oil grew and pressures on Saudi
finances increased, Riyadh
signalled they were willing to show more flexibility to prop up prices.
However, the first attempt at a global production pact collapsed in April when Riyadh
has said it will not join any such agreement until it regains market share and boosts output to pre-sanctions levels of around 4 million bpd.
members will meet on the sidelines of the International
Energy Forum, which groups producers and consumers, in Algeria
from September 26-28. Non-Opec
is also attending the forum.