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[LONDON] Saudi Arabia, the world's biggest oil exporter, has offered to cut its output to January levels, Algeria's energy minister said as he prepared to host a meeting of Opec producers later this week.
Prices rebounded Monday after tumbling 3.7 per cent on Friday as Saudi Arabia signalled the Algiers meeting will be consultative and unlikely to reach a firm decision.
While Noureddine Boutarfa's comments don't change that, they suggest Opec's leading member may still be willing to work toward the group's first production curbs since the organisation let members produce at will in late 2014, causing prices to plunge. Opec meets again in Vienna in November.
The oil market is in a "much more critical" state than when the Organization of Petroleum Exporting Countries last met three months ago, Mr Boutarfa said Sunday in an interview.
Aside from the Saudis, producers have made additional proposals, he said later at a news conference, without giving details.
"Saudi Arabia is ready to freeze production at the January level," Mr Boutarfa said, calling the offer "an interesting step".
Saudi Arabia pumped a record 10.69 million barrels a day in August compared with 10.2 million in January, data compiled by Bloomberg show. Algeria wants the group to cut its collective output by 1 million barrels a day, Mr Boutarfa said.
More than 800,000 barrels a day of additional crude is entering the global market this month compared with August as Russia pumps at an all-time high and Libya and Nigeria restore disrupted supplies, according to statements from their ministry officials in those nations.
The surplus will last for longer than previously thought, persisting into late 2017 as demand growth slumps and supply proves resilient, the International Energy Agency said. Tumbling crude has put financial pressure on Opec members from Saudi Arabia to Gabon.
Crude prices, which have dropped more than half from their 2014 peak amid a global supply glut, rebounded last month on speculation that Opec and Russia might revive a pact to limit production. Prices have since cooled and Brent crude futures fell 3.7 per cent to US$45.89 a barrel on Friday, before rising as much as 1 per cent on Monday. They were at US$46.26 at 7:19am in Singapore. A reasonable price for Algeria would be a range of US$50 to US$60 a barrel, Mr Boutarfa said.
"The situation since the last meeting in June has worsened," said Mr Boutarfa, who's been involved in talks with Saudi Arabia and other members in the run-up to the meeting.
"So it's important to see what measures can be adopted in the short term and very short term to find a solution to this situation that isn't helping any Opec country."
Saudi Arabia and Iran, whose rivalry blocked a deal with other major producers in April, did not reach an agreement after two days of preparatory talks in Vienna, including a Saudi offer to pump less crude if Iran caps output at current levels, according to two people familiar with the negotiations.
The main difference between the Algiers talks and producers' failed attempt at a freeze in April in Doha is that Iran will be present for this week's discussions, Mr Boutarfa said.
Now is the "right time" for Opec to reach an agreement on output, and crude prices may fall if its members fail to take a decision in Algiers, said Falah Al-Amri, Iraq's governor to the group.
Countries have boosted output and reached their targets, and current oil prices are not good for producers, Al-Amri said on Sept 22 at an energy event in Fujairah in the United Arab Emirates.
Opec's talks will be informal but can be converted into an extraordinary meeting, which could result in a decision by the group, Mr Boutarfa said.
Russia hasn't received offers from other producers about a possible output cut, and the lack of an agreement in Algiers would not be critical for the country, Russian Energy Minister Alexander Novak said, according to a RIA Novosti report on Sunday.
"I'm still skeptical there will be a deal, or a deal with any teeth," Robin Mills, chief executive officer of consultants Qamar Energy, said by phone from Dubai.
"If there is any agreement, it would give a boost to the oil market, especially if there is a Saudi cut."