Oil prices rose by about one percent on Monday after top exporter Saudi Arabia announced a cut in supply for December, seen as a measure to halt a market slump that had seen crude decline by 20 percent since early October.
Saudi Arabia raised its production from around 9.9 million barrels per day in May to around 10.7 million bpd in October, according to Energy Minister Khalid al-Falih.
A big concern for Saudi Arabia and other traditional producers from the Middle East dominated Organization of the Petroleum Exporting Countries (OPEC) is the surge in U.S. output.
But the producer nations eased the output cuts in June after signs of a tight market and higher prices, allowing hundreds of thousands of extra barrels into the market.
Saudi Arabia is discussing a proposal to cut oil output by up to 1 million barrels per day by OPEC and its allies, two sources close to the discussions told Reuters on Sunday.
It was "premature to talk about a specific action", he told reporters, asked about the possibility of an output cut to support sliding prices.
Iraq and Saudi Arabia agreed on Saturday to work together to stabilise oil markets, Iraq's Oil Ministry spokesman Asim Jihad said, without giving further details.
In his speech at the start of the meeting, Falih said the recent sharp drop in prices had "surprised us".
He also attributed the sharp drop in prices to "microeconomic uncertainties", and signs of a build-up in crude inventories.
The sources said the discussions were not finalised as much depended on the reduction in Iranian exports.
"Prices have been falling amid a continued rise in crude supplies from big producers, such as Saudi Arabia, Russia and the USA, more than compensating for lost Iranian barrels", Forex.com analyst Fawad Razaqzada told AFP.
"If they fail to signal any intention to reverse the latest increase in production, oil prices threaten to slide further", the bank said in a note.