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Russia and Saudi Arabia pledge to stabilize oil output
Crude prices gained more than 5 percent before Al-Falih and Novak made a joint statement, amid speculation that the two oil producers could reach an agreement to cap output. The country has refused to participate in freezing production. Energy companies are forced to take austere measures – including asset sales, reduction in headcount, and project delays – to withstand the test of time.
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“It seems like we’ve found a new trading range in the $40s now and the market is very sensitive to any stories about the possibility of a production freeze”, said Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut. The global benchmark on Monday hit a near one-week high of $49.40 after the Russia-Saudi news.
The statement increased expectations of the possible deal on output freeze and oil prices rose following the announcement, the increase, however was below the anticipated level.
OPEC and non-OPEC oil producing nations (including Russia) are scheduled to meet at the end of this month in Algeria, but few market watchers expect a deal to materialize.
OPEC members Kuwait, Nigeria and the United Arab Emirates all welcomed the Saudi-Russian pledge.
OPEC member-states disagree over the fact whether Iran has reached the oil production level that was before the sanctions or it has not, Russian Energy Minister Alexander Novak told reporters.
The losses pared Friday’s three percent gains, which came after Putin said Russian Federation and other producing nations should freeze output to stabilise fluctuating prices. Novak said outright oil production cuts may also be discussed in Algeria.
The lack of cooperation in the face of a two-year price collapse reflects a schism within OPEC between its biggest member – Saudi Arabia – and Iran, which is increasing production after years of global sanctions. This stems from the fact that the two countries now shoulder the responsibility of producing more than 2I -percent of global oil demand which is required to fuel global economic growth, improve standards of living and help achieve the Millennium Development Goals.
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The oil market remains oversupplied, with US inventories of crude oil and refined products at a record high, according to the Energy Information Administration. While it has recovered recently, it is still well off highs above $100 seen in mid-2014.