Speculation is rife that Saudi Arabia is about to surprise oil markets when the Organization of Petroleum-Exporting Countries (OPEC) meets on Friday by finally deciding to cooperate with other global oil producers on cutting production.
OPEC is due to meet in Vienna on Friday in a highly-anticipated meeting of the 12-member oil producing group. Saudi Arabia is seen as the main swing producer and de facto leader of the group as it is able to increase or decrease supply at minimal cost, and has spare production capacity.
On Thursday, crude prices edged up on a report suggesting that Saudi Arabia will propose a deal to balance the oil market. Analysis firm Energy Intelligence said the country could propose a cut of 1 million barrels per day (bpd) in OPEC output, citing a senior OPEC delegate. A Saudi oil source told Reuters on Thursday that media reports of a Saudi OPEC output cut proposal were "baseless". "It is baseless," the source, who asked not to be named, said without elaborating.
The executive director of the International Energy Agency (IEA), told CNBC Thursday that he would not comment on the speculation but said he had faith in Saudi Arabia to make the right decision.
"I wanted to say that looking at the past, Saudi Arabia has always behaved in a very responsible manner," Fatih Birol said.
"When there was a problem in the markets, Saudi Arabia was always there to comfort the market and they behaved like the central banker of the oil industry. So that's why I have all the trust in them that they will follow a policy that will benefit world oil markets and the global economy."
You couldn't blame anyone for having doubts over whether Saudi Arabia is really ready to support oil prices that have fallen from a peak of $114 a barrel last June, to around $40 a barrel currently.
After all, it would be the first sign in a while that that the leading OPEC producer is willing to compromise on production to stem the price decline. OPEC refused to cut oil production at its meeting last year -- despite opposition from some members -- in a bid to maintain market share in the face of rival U.S. shale oil producers – many of whom have indeed cut production, cancelled projects and closed rigs.
It was a seminal moment for oil markets and prices have continued to slide since then on the back of a glut in supply and with demand unable to keep up.
Showing that Saudi Arabia may not be willing to make all the sacrifices in production alone, it was reported that the country also wants non-OPEC producers such as Mexico and Russia to participate in a deal to cut production.
The price declines have taken their toll, Birol said, underlining that investments in the oil industry had declined by more than 20 percent in 2015 and that "more importantly, we expect this decline to continue in 2016."
"This is the first time in 30 years that we've seen declines in oil investments for two years in a row," he said, warning that this could have implications if demand gets stronger in the near-term.
"If demand gets stronger, which could well be the case, we may well see strong upward pressure under oil prices."
- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt.