OPEC sources reportedly said that if Tehran refuses to limit its supply, Riyadh says it could raise oil output steeply to bring prices down, stirring up old disputes between Saudi Arabia and rival Iran which resurfaced at a meeting of OPEC experts last week, reported Reuters.
Frequent in recent years, there have been clashes between the two OPEC heavyweights even as they are fighting proxy wars in Syria and Yemen.
The prospect that OPEC would take steps to boost oil prices brightened after Saudi Arabia agreed to support a global oil supply limiting pact resulting in subsidence of tensions between the countries.
According to five OPEC sources who were present at the meeting and spoke to Reuters on condition of anonymity, Saudis and Iranian clashed again at a meeting of OPEC experts last week, designed to work out details of cuts for the next OPEC ministerial gathering on Nov. 30.
“The Saudis have threatened to raise their production to 11 million barrels per day and even 12 million bpd, bringing oil prices down, and to withdraw from the meeting,” one OPEC source who attended the meeting told Reuters.
Comment on discussions during the closed-door meetings last week was not made by OPEC headquarters. Saudi and Iranian OPEC delegates also declined official comments.
Saudi Arabia did not say output will rise, rather that it “could” rise, a senior Gulf OPEC source reportedly told Reuters.
“Saudi doesn’t threat, Saudi Arabia doesn’t produce more than the customers need. All oil producers could raise their production if there was no agreement, this is a fact,” the source said.
Adding extra supply would only worsen the global glut, which has already seen prices more than halving from $115 a barrel since mid-2014, even as Saudi Arabia has increased output since 2014 to record highs of around 10.5 million-10.7 million barrels per day.
OPEC sources were quoted by Reuters as saying that at the meeting Iran said it was unwilling to freeze its output, following which the Saudi took this stance. As its production recovers after the lifting of EU sanctions, it should be exempt from such limits, Iran has argued.
To claw market share back from higher-cost producers, Riyadh had engaged in a pump war that it embarked on at the end of 2014 and its present position will revive those memories. The Saudi strategy had been severely criticized by Iran along with other OPEC price hawks.
Since the appointment of Khalid al-Falih as energy minister in May this year, Riyadh has softened its stance.
In the first such deal since 2008 and with special conditions given to Libya, Nigeria and Iran, whose output has been hit by wars and sanctions, OPEC agreed at a meeting in Algeria on modest preliminary oil output cuts in September.
The fragile nature of OPEC agreements was highlighted by a new rise in tensions observed during the meeting of experts last week. Before it turns its preliminary Algerian accord into a real deal, the group has a long way to go.
(Adapted from Reuters)