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Saudis Said to Have Offered to Cut Oil Output; No Deal Reached

  • Pact would require Iran to freeze production at current levels
  • Other proposals also said to have been made at Vienna talks

Saudi Arabia proposed rolling back its production from record levels in exchange for Iran freezing its current output, although talks in Vienna between the two OPEC members didn’t result in an agreement.

Saudi Arabia, the world’s largest oil exporter, told Iran it would be willing to reduce its output -- which is close to a record 10.7 million barrels a day -- if its regional rival were to cap production at 3.6 million, according to two people familiar with the matter, who asked not to be identified because the talks were private. Other proposals were also discussed by oil officials from the countries at the headquarters of the Organization of Petroleum Exporting Countries in two-day talks that ended Thursday without a deal, one of the people said.

Oil-producer meetings from Vienna and Paris to Moscow have attempted to reach a consensus before talks in the Algerian capital next week. While the former OPEC president, who steered the group the last time it cut supply, said he’s confident there will be an accord, all but two of 23 analysts surveyed by Bloomberg this week predicted there won’t be a deal. A failure to agree curbs on output could mean the global surplus will continue swelling through 2017.

Brent, the global crude benchmark, rose as much as 61 cents or 1.3 percent to $48.26 a barrel, erasing earlier losses after Reuters first reported the Saudi proposal. Brent was up 13 cents at $47.77 as of 12:55 p.m. London time.

Saudi Arabia has resisted any proposals to cut production since it led OPEC to shift strategy in 2014. Since then, the group has pumped without limits to protect market share from rival supplies including U.S. shale oil, rather than cut output to support prices.

Iran produced 3.62 million barrels a day on average in August, an increase of 820,000 since the start of the year, according to data compiled by Bloomberg. The Persian Gulf nation has consistently increased output since January after western sanctions over its nuclear program were lifted and repeatedly said it’s entitled to recover its previous level of about 4 million barrels a day.

OPEC and Russia -- the world’s biggest energy exporter -- are meeting next week in Algiers for talks that may include proposals to freeze output in an effort to help rebalance the oil market as a sustained glut keeps prices below $50 a barrel, about half the level two years ago.

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