With the Saudi Aramco IPO imminent, the kingdom is looking to deepen oil cuts in an effort to keep the price of crude high as it pushes ahead with the listing of its "crown jewel".
Prince Abdulaziz Bin Salman, the new Saudi oil minister, is expected to pressure OPEC members in Vienna on Thursday to comply with the existing deal to keep production low. The seasoned oil diplomat is anticipated to take a much harder line than his predecessor, and will seek to deepen oil cuts and have the deal in place so it runs at least until June 2020. The current deal expires in March.
The deal being discussed by OPEC 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 or 1.2 per cent of global supply, reported Reuters.
Russia, a key non-OPEC ally, has so far opposed deeper cuts or a longer extension but the Saudis are said to be working on a plan to convince Moscow. Riyadh needs high oil prices to balance its budget and support the pricing for the Aramco initial public offering (IPO), which is expected to be the world's biggest.
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The kingdom has been somewhat in the ropes lately. It's State General Reserve Fund fell from 496.04 billion Saudi riyals ($132.2 billion), in September, to 490.06 billion Saudi riyals ($130.7 billion) in October, marking a decline of nearly six billion Saudi riyals ($1.6 billion). It's hoped the Aramco flotation will ease some of its economic woes.
The Saudis are also said to be 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.
With much riding on the Aramco deal, Riyadh has been cutting more than the amount agreed for most of this year. Its actual cut in November, was 783,000 bpd, according to a Reuters survey, a level that was about 400,000 bpd more than its pledged cut of 322,000 bpd.