The Saudis have a plan

The kingdom will suggest members of OPEC - and some non-members - lower global oil production by 1 million barrels per day in order to bring balance back to an oversupplied energy market, according to a report in International Oil Daily that sourced a senior OPEC delegate.

The proposal, if implemented, would mark an about-face in OPEC's current policy, which has been to maintain high production levels to protect members' market shares.

But that policy has come at a cost as the price of oil has fallen by more than 60 percent since last June.

On Thursday, a barrel of US crude was trading at $40.58 a barrel after sinking below $40 on Wednesday. In London, Brent crude was going for $43.37 a barrel, up more than 2 percent since the day before.

The jump in oil prices from near-2015 lows was largely attributable to the news suggesting Saudi Arabia was seriously trying to come up with a strategy to return balance to oil markets.

Some conditions

The kingdom's proposal, however, comes with stipulations that may be hard for some countries to meet and could ultimately derail those plans.

First, International Oil Daily said, the Saudis' plan would require some non-OPEC states such as Russia, Mexico, Oman and Kazakhstan to also agree to export less oil. They also want Iraq - which is already exempt from OPEC quotas after years of war left its economy in tatters - to freeze output at current levels of 4 million barrels per day.

The third and last condition is that Iran must also participate, a tall order as international sanctions against the Islamic Republic are set to be lifted early next year. Teheran has pledged to get its oil exports back to 4.3 million barrels per day within 12 months once the sanctions end. That's more than 1 million barrels per day than it's exporting now.

Iran stays defiant

Upon arrival in Vienna on Thursday, Iran's oil minister, Bijan Zanganeh, insisted that his country would not give in to demands to curb its oil production.

"It's our right" to pump out and sell more oil, he said, according to Agence France-Presse. "It's not a matter of discussion with anyone to limit the level of production of Iran."

Zaganeh went on to blame other OPEC members for not doing enough to alleviate downward pressure on oil prices, referring specifically to countries that are together exporting more oil than OPEC's ceiling of 30 million barrels per day permits.

In November, OPEC members sold 32.12 million barrels per day, according to a survey by Bloomberg.

Oversupply is not the only reason oil prices are so low. A strong US dollar - which is only expected to get stronger if the Federal Reserve raises interest rates - makes oil priced in that currency more expensive for holders of other money. An economic slowdown in China, the world's largest consumer of energy, has also weighed on revenues for oil exporters.

cjc/uhe (International Oil Daily, AFP, Reuters)