This week, Brent crude oil prices were trading $0.67 per barrel more than WTI crude oil prices.
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Global oil production over the next 12 months will fall as much as 1.5 million barrels a day with as much as two-thirds of the reduction coming from the U.S., according to FGE Chairman Fereidun Fesharaki.
“There’s growing skepticism that there will be an agreement to cut production”, said Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees $128 billion of assets.
Sources say that OPEC officials were holding bilateral talks to persuade Russian Federation to participate in cuts alongside OPEC and for Iran to soften its position.
The minister alleged that OPEC heavyweight Saudi Arabia had proposed that oil-producing countries cut production by up to five percent, a prospect he said would be discussed at an upcoming meeting.
Until this week, Russia, which relies on energy for more than 40 per cent of its budget revenue, had repeatedly stated its goal of keeping crude production stable even as prices tumble.
“We remain highly skeptical that such a meeting will result in credible cuts in supply; thus, we see this as nothing more than an attempt to shift market sentiment, and we do not expect that it will change the physical market imbalance”, Barclays said, referring to meetings between OPEC members and Russian Federation. Novak stressed it is “too early” to call anything a concrete agreement. However, the possibility of a short-term supply cut would be sufficient to provide oil prices with a tailwind.
In mid-January data appeared, which showed that Saudi Arabia’s oil exports had grown in November by 4.8 percent to 7.719 million barrels per day. “If there are short-term adjustments that need to be made and other producers are willing to collaborate, then Saudi Arabia is willing to collaborate”. Oversupply of oil in the market due to higher output has pushed prices to record lows affecting the producer countries and the energy companies worldwide.
That appeared to pour cold water on possible joint OPEC and non-OPEC production cuts mentioned by Russian Energy Minister Alexander Novak on Thursday, comments which raised hopes of the first such global output deal in over a decade.
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The Saudi-backed strategy is aimed also at pressuring Russian Federation – the world’s biggest oil producer – and forcing fellow OPEC member Iran to trim output as Tehran looks to hike its own production after the lifting of Western sanctions.
