A decision on cutting oil production is possible only if all crude-exporting nations are in agreement and there’s no timing for talks, Russia’s Energy Minister Alexander Novak said.
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Thus, reports about the Russian oil companies discussing possible output cuts with the Ministry of Energy have raised oil quotes, which increased from $31.1 per barrel in late afternoon trading on Wednesday to $33.3 on Thursday.
The Russian minister also said that it was reasonable to discuss the situation in the oil market and that OPEC was trying to organise a meeting with other producers next month.
A little over a week ago the value of Brent slumped to 13 year lows below in the aftermath of some nuclear sanctions being lifted from Iran, a move which will lead to huge new oil exports being made available.
Anticipation that OPEC and non-OPEC producers could coordinate production cuts has been around all week, and a closing gain on Thursday would be the third in a row.
A spokesman for Lukoil, Russia’s No. 2 oil producer whose vice-president said earlier this week that Moscow should start talking to OPEC, declined to comment. However, the possibility of a short-term supply cut would be sufficient to provide oil prices with a tailwind. The source suggested any potential production cut deal would imply Iran would need to keep its output flat or raise it by 100,000 barrels per day.
But analysts cautioned against putting too much hope on such talks, noting that similar discussions in the past had failed to end with concrete results. Market prices for crude benchmarks dropped to a 12-year low in mid-January, sliding below the historic level of $30 a barrel before starting to recover after January 20.
Saudi Arabia, the de facto head of OPEC, has stood by a robust production policy, saying it wanted to protect its market share on the expectation that demand would eventually return.
But things have changed now and the oil price issue could unite the various producer groups fighting a market glut.
The two countries’ opposing views on Syria, where Russian Federation is President Bashar Al-Assad’s closest ally and Saudi Arabia seeks his removal, present another diplomatic obstacle. The outcome could be a five percent cut in Russian and Saudi Arabian production.
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Non-OPEC Russia said this week it could cooperate with OPEC on production curbs, something it had been refusing to do for 15 years since the ill-fated agreement with OPEC in 2001.
