Saudi Arabia to cap oil production only if other producers agree to freeze output

Saudi Arabia won’t restrain its oil production unless other producers, including Iran, agree to freeze output at a meeting this weekend in Doha, the kingdom’s deputy crown prince said. Iran said it had decided to stay at home.

The world’s biggest crude exporter would cap its market share at about 10.3 million to 10.4 million barrels a day, if producers agree to the freeze, Prince Mohammed bin Salman said during an interview on Thursday at King Salman’s private farm in Diriyah. On Saturday, Iran’s deputy oil minister said the country “saw no reason” to attend the talks because it needs to get back to the level it produced before international sanctions against Tehran.

The comments from the world’s largest oil exporter and its main rival in the Middle East will cast doubt on the outcome of Sunday’s summit where at least 15 oil ministers from Opec and beyond will discuss freezing output to stabilise an oversupplied market. Crude oil has rallied more than 30 per cent since an agreement was first mooted in February.

“If all major producers don’t freeze production, we will not freeze production,” said Prince Mohammed, who has emerged as Saudi Arabia’s leading economic force. “If we don’t freeze, then we will sell at any opportunity we get.”

A Russian official said it was possible to reach a deal in Doha to freeze oil output, regardless of Iran whose crude shipments have risen by more than 600,000 barrels a day this month. That increase has added to the pressure on producer nations to reach an agreement to prop up prices as economies from Venezuela to Nigeria reel from the market rout.

The meeting in Doha is only relevant if no deal is reached, prompting a sharp sell-off in the markets, according to Ed Morse, head of commodities research at Citigroup Inc.

Ministers from Nigeria, Ecuador, Algeria as well as Opec’s secretary-general and Iraq’s representative had all arrived in Doha on Saturday. None wanted to comment on prospects for Sunday’s meeting.

The credit ratings of more than 10 oil-producing nations in the developing world were placed on review in March for a downgrade by Moody’s Investors Service, which cited the shock of depressed prices on these economies. The list includes Russia, Kazakhstan, Nigeria, Angola, Gabon and five of the six Gulf Cooperation Council nations – Kuwait, Saudi Arabia, the United Arab Emirates, Bahrain, and Qatar, according to Moody’s.

Saudi Arabia’s creditworthiness was downgraded at Fitch Ratings after the plunge in oil prices. The kingdom’s rating was lowered one level to AA-, the fourth-highest investment grade, the ratings company said on Tuesday. It maintained a negative outlook for the credit, signaling the possibility of more downgrades.

“If prices went up to US$60 or $70, that would be a strong factor to push forward the wheel of development,” Prince Mohammed said. “But this battle is not my battle. It’s the battle of others who are suffering from low oil prices.” 

Prince Mohammed also said that Saudi Arabia isn’t concerned because “we have our own programmes that don’t need high oil prices.”

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