Novak also said that it was reasonable to discuss the situation in the oil market and that OPEC was trying to organize a meeting with other producers next month. Saudi Arabia has said that if it cuts production, that would only allow higher-cost producers in the US and elsewhere to drill more wells. Crude oil prices are facing negative pressure because markets are flush with oil as global economic momentum slows, a trend reflected in emerging weakness in China. Novak cautioned that it’s “too early” to call anything a concrete agreement.
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The price of a barrel of oil surged higher on Thursday and hit a three-week high following reports that OPEC nations will gather in February to potentially discuss a cut in oil production.
“Potentially, this will happen with Russia’s cooperation limited to half the percentage reduction that OPEC members need to make for the adjustment”, analysts said.
Until this week, the biggest producers gave little indication they were willing to slash production for the sake of shoring up oil prices.
Saudi Arabia has pressured the currency and opened up a record state budget deficit of around US$100 billion.
While Saudi is far from penniless, the fall in the price made the Gulf state tap the bond market for $27bn late a year ago and it is now mulling an initial public offering of state-owned oil company Saudi Aramco.
Benchmark Brent futures jumped as much as 8 percent on Thursday to almost $36 a barrel on news of the potential deal, which if implemented would immediately reduce surplus global output exceeding demand by 1 million barrels per day (bpd). “With capital expenditure slashed and energy projects killed, a 5 per cent cut would get the market in balance”, said Mr Phil Flynn, a senior market analyst at Price Futures Group.
“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, referring to meetings between OPEC members and Russian Federation.
Oil has slid more than 9 percent this year as volatility in global markets adds to concern over brimming USA stockpiles and the outlook for increased exports from Iran after the removal of worldwide sanctions. The paper said Iran wants to boost crude exports by 1.5 million barrels per day.
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Iranian Oil Minister Bijan Zanganeh, attending a Franco-Iranian summit in Paris on Thursday, said Iran had not been contacted by Russian Federation about any cuts in output.
