Oil prices have increased following news of Saudi Arabia’s reported proposal to cut output to balance the market in 2016.

Benchmark Brent crude futures rose 88 cents, more than 2% at $43.37 a barrel, while the US crude was trading 64 cents higher at $40.58 a barrel, Reuters reported.

Energy Intelligence reported that Saudi Arabia is set to propose that the Organization of the Petroleum Exporting Countries (OPEC) reduces output by one million barrels per day (bpd) next year.

"OPEC is set to discuss its production policy. "

The report stated that Riyadh may consider reducing output under certain conditions and the decision will not be agreed during OPEC’s meeting on Friday in Vienna.

At its meeting, the group is set to discuss its production policy.

The group of 12 OPEC countries account for around 40% of the global crude production.

Such a reduction will only proceed if non-members such as Russia, Mexico, Oman and Kazakhstan commit to joint action.

Landesbank Baden-Wuerttemberg oil analyst Frank Klumpp told the news agency that Saudi Arabia’s proposal of a global deal to balance the market led to an increase in oil prices.

Iraq’s oil minister said he was willing to have an open discussion on the proposal.