Oil rises on report of Saudi proposal to balance market next year

LONDON (REUTERS) - Oil prices rose from near-2015 lows on Thursday after a report sourced to a senior OPEC delegate said Saudi Arabia would propose a deal to balance oil markets with non-OPEC help next year.

Benchmark Brent crude futures were up US$1.09 (S$1.53), or 2.5 per cent, at US$43.58 a barrel at 1157 GMT. U.S. crude was trading 69 cents higher at US$40.63 a barrel after sinking below US$40 on Wednesday.

Saudi Arabia, which has so far resisted any market intervention to prop up oil prices, will propose the Organization of the Petroleum Exporting Countries (OPEC) cut output by 1 million barrels per day (bpd) next year, Energy Intelligence reported. A Saudi oil source told Reuters the report was "baseless".

An OPEC production cut would only go ahead if non-members like Russia, Mexico, Oman and Kazakhstan commit to joint action, the senior delegate was cited as saying. OPEC ministers are gathering in Vienna for their policy meeting on Friday.

"Oil prices are rising because of the talk that Saudi Arabia will propose a global deal to balance the market," said Frank Klumpp, oil analyst at Stuttgart-based Landesbank Baden-Wuerttemberg.

Iran's oil minister was quick to dismiss on Thursday the possibility of limiting Tehran's production ramp up once Western sanctions are lifted. Iraq's oil minister said he was willing to have an open discussion on a Saudi proposal.

OPEC sources and analysts said the Saudi proposal would be difficult to agree as Iraq is struggling to balance its budget even despite soaring output and Iran has long argued its market share was stolen by rivals during the years of sanctions.

"It is very difficult to cut one million bpd collectively. The Saudis do not want to change their previous talk. No cut without cooperation," a Gulf OPEC source told Reuters.