Oil rises on Saudi offer to cut output as OPEC talks loom

Oil prices jumped on Friday after reports were received that Saudi Arabia could reduce its crude production should regional foe Iran cap its own output this year.

The Saudi offer, ahead of next week’s meeting of OPEC ministers trying to staunch oil price losses, has yet to be accepted by Tehran, three sources familiar with the discussions told Reuters.

Brent crude oil and U.S. West Texas Intermediate (WTI) futures turned positive immediately after the news, with the European benchmark jumping more than 1 percent.

By 11:11 GMT, Brent futures were at $48.04 per barrel, up 39 cents or 0.82 percent. WTI futures were trading at $46.40 per barrel, up 8 cents or 0.17 percent.

Oil futures started the day in negative territory as investors held little hope of a breakthrough to prop up prices at talks held by members of the Organization of the Petroleum Exporting Countries in Algeria next week.

But the Saudi offer revives the notion, as signalled by Riyadh and Tehran earlier in the year, that they could coordinate to support the market.

If agreed, such a deal would shift Saudi Arabia’s strategy of defending its share of the global market, despite falling prices, at the expense of other producing countries, especially those where oil production is more expensive.

Market observers say a deal to freeze crude output across 14 OPEC members spanning Asia, the Middle East and the Americas is still unlikely. However, some sort of cooperation among exporters should prevent production from ballooning further.

ANZ bank said “discussions between Saudi Arabia and Iran this week suggest they are keen to get something done … which raises the possibility of a sharp reaction to the upside in prices if an agreement is reached”.

OPEC members will meet on the sidelines of the International Energy Forum, which groups producers and consumers, from Sept. 26-28. Non-OPEC producer Russia is also attending the forum.