Oil price jumps to $50 as OPEC members agree to cut production by 1.2 million barrels per day from January 2017.
Saudi Arabia wants crude oil prices to rise to around $60 a barrel this year, five sources from OPEC countries and the oil industry said.
This is the level the OPEC heavyweight and its Gulf allies – the United Arab Emirates, Kuwait and Qatar – believe would encourage investment in new fields but not lead to a jump in US shale output, the sources told Reuters news agency.
The Organization of the Petroleum Exporting Countries, Russia and other producers pledged last year to cut production by about 1.8 million barrels per day (bpd) from January 1. The first cut in eight years is intended to boost prices and get rid of a supply glut.
Crude prices have risen by more than 14 percent since the November pact but are still only trading around $56 a barrel despite record compliance by OPEC and non-OPEC members.
OPEC officials have repeatedly said the group does not target a specific oil price and their focus is on drawing global oil inventories and helping the market to re-balance.
But behind closed doors, Riyadh and its Gulf OPEC allies hope to see a higher level because the low price has pressured their finances and stoked fears of a future supply shortage.
However, they do not want the price to be so high that it encourages rival US shale producers, which were hard hit by the slump in oil prices, to ramp up production again. Advances in technology have made it easier for them to adapt quickly to oil price fluctuations.
More than $1 trillion worth of oil projects have been cancelled or delayed since mid-2014. A decline in investments in future oil projects triggered worries that this could lead to a supply shortage and spike in oil prices.
Oil fields take around four years to develop before production can start, whereas US shale oil can now be extracted within a few months of a decision.
“In general, something around $60 this year is good; $60 will not encourage that big increase in shale,” one OPEC source told Reuters news agency, adding that shale oil production is expected to grow by about 300,000 bpd this year.