DUSHANBE, February 16, 2016, Asia-Plus – Russia and Saudi Arabia have agreed not to increase oil output.
According to
Bloomberg
, Saudi Oil Minister Ali Al-Naimi told reporters in Doha Tuesday after the talks with Russian Energy Minister Alexander Novak that the deal to fix production at January levels, which includes Qatar and Venezuela, is the “beginning of a process” that could require “other steps to stabilize and improve the market. Qatar and Venezuela also agreed to participate, Naimi said.
“The reason we agreed to a potential freeze of production is simply the beginning of a process” over next few months,” Naimi told reporters. “We don’t want significant gyrations in prices. We don’t want a reduction in supply. We want to meet demand. We want a stable oil price.”
Saudi Arabia has insisted it won’t cut production unless major producers outside the cartel cooperate. Russian Energy Minister Alexander Novak has said cooperation is possible if other producers joined in.
Russian media outlet
RT
, formerly known as
Russia Today
, reports that the CEO of Russia’s biggest oil producer Rosneft Igor Sechin said last week that his company would defend traditional markets and raised doubts about production cuts. “Tell me who is supposed to cut? Will Saudi Arabia cut production? Will Iran cut production? Will Mexico cut production? Will Brazil cut production? Who is going to cut?” asked Sechin.
“We are working on preserving our traditional markets and we will supply those markets with oil in a competitive battle,” he added.
However, plummeting oil prices have forced producers unwilling to cut production to the negotiating table, according to
RT
. While Venezuela has been by far the hardest-hit big crude producer, current oil prices make it difficult for Russia to balance its budget. Riyadh’s budget has also taken a hit , running an official $98 billion budget deficit in 2015. IMF estimates dispute official Saudi figures, placing the Kingdom”s budget deficit at $140 billion.
Speculators ruled the oil markets on Tuesday as renewed hope of production cuts sent crude prices nearly six percent higher.
“A freeze would not create an immediate U-turn but it creates a better foundation for the price recovery in the second half,” Olivier Jakob, head of oil consultants Petromatrix said in a note to clients, quoted by
Bloomberg
.
