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.
Advertisement
An oil pipe is seen in front of a drilling rig at a Lukoil-owned oil field outside the West Siberian city of Kogalym, Russia, January 25, 2016. This pulled down Brent crude oil prices.
On Thursday, Russian Energy Minister Alexander Novak said Moscow is ready to discuss “coordinating” with OPEC and mutual production cuts of up to 5%.
Saudi officials have not commented on Novak’s claim. He argued it was unfair for Saudi Arabia to cede market share to US shale oil drillers and other competitors to benefit other countries’ economies.
Oil prices rose for the third straight day on Thursday on hopes of the first global deal in over a decade between among oil-producing countries to help clear a glut that has depressed prices for over a year and a half.
United States crude oil prices, which recently fell below the $US30 threshold, climbed as high of $US34.82 a barrel. If discussions with OPEC begin in earnest, that would be a major reversal in Russia’s stance. “The meeting participants discussed the possibility of coordination of actions with OPEC members amid unfavorable market conditions on the global oil market”, the Energy Ministry official said.
Spending on global oil and gas exploration and production will fall nearly 20 percent this year to about $450 billion, according to consultant Wood Mackenzie Ltd, and independent United States explorers are expected to report losses totaling more than $15 billion this earnings season.
“We remain highly sceptical 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 on Thursday, referring to meetings between Opec members and Russian Federation. Still, this month’s price slump has put the country under increasing financial pressure.
Advertisement
Sources familiar with the matter told Reuters that Iran is reluctant to restrain supply as it wants to claw back market share and feels that its economic situation is less affected by the low oil price because of the lifting of sanctions. Now that this relief rally is occurring, is a possible cooperation among oil-producing nations enough to sustain an actual recovery in oil prices?
