OPEC and its allies plan to deepen oil cuts and have the deal in place so it runs at least until June 2020 as Saudi Arabia wants to deliver a positive surprise to the market before the listing of Saudi Aramco, two sources familiar with the talks said.
The deal being discussed by the Organization of the Petroleum Exporting Countries and other producers, known as OPEC+, would be to add at least 400,000 barrels per day (bpd) to existing cuts of 1.2 million bpd. The current deal runs to March.
“They (the Saudis) want to surprise the market,” one of the sources said.
Another two sources said the latest OPEC analysis, drawn up by OPEC’s Economic Commission Board (ECB), showed a large oversupply and build up in inventories in the first half of 2020, if not additional cuts were made.
Prince Abdulaziz bin Salman heads to Vienna this week for his first OPEC meeting as Saudi Arabia’s energy minister.
The veteran oil official, known as a tough negotiator, wants to make ensure oil prices stay high enough during Aramco’s initial share offering (IPO), sources said.
The IPO will be priced on Dec. 5, the same day OPEC meets in Vienna. The OPEC+ grouping holds talks on Dec. 6.
Saudi officials, including Prince Abdulaziz, have insisted on stricter compliance with the current cuts, especially as countries such as Iraq and Nigeria have produced well above their quotas while Riyadh has cut more than demanded.
However, the Saudis are lobbying other producers to deepen cuts and have been signalling that they are ready to continue taking the biggest burden and to cut well in excess of their target.