OPEC delegates said there were no plans to hold talks to cut production after Russia’s energy minister said his country was willing to meet with the group next month to coordinate output policy.
Alexander Novak said in St. Petersburg that Russia would be willing to discuss output levels with the Organization of Petroleum Exporting Countries, Interfax reported on Thursday. Four OPEC delegates said they had not heard yet of any plans for talks. The group’s next scheduled meeting is in June.
“It’s possible that Russia could be testing the waters to gauge how OPEC members would respond to the idea of cuts,” said Jason Bordoff, director of the Center on Global Energy Policy at Columbia University and a former senior oil official at the White House.
Oil rose as much 7.8 percent to $34.82 a barrel in New York trading, the highest since Jan. 6, after Novak’s comments were reported. It traded at $33.73 at 10:18 a.m. local time.
Read Also:
Until this week, Russia, which relies on energy for more than 40 percent of its budget revenue, had repeatedly stated its goal of keeping crude production stable even as prices tumble. Still, this months’ slump in prices to a 12-year low has put the country under increasing financial pressure. The Finance Ministry says the nation’s budget deficit, already at a five-year high in 2015, may widen this year as the rout deepens.
At previous OPEC meetings, Saudi Arabia proposed an output cut of about 5 percent for crude producing nations in general, without focusing on Russia, Interfax reported, citing Energy Minister Alexander Novak in St. Petersburg.
When asked if that proposal remains for a proposed meeting with OPEC in February, he declined to comment, saying, “that is exactly the subject of discussion.”
There are significant obstacles in the way of an agreement with OPEC. Saudi Arabia, the group’s biggest producer, is keen to defend market share and Russia’s inability to cut production in winter months makes coordination difficult.
The two countries’ opposing views on Syria, where Russia is President Bashar Al-Assad’s closest ally and Saudi Arabia wants him gone, present another significant diplomatic obstacle.
With OPEC effectively abandoning its output ceiling in December, Russia pumping at record levels and U.S. shale fields proving more resilient than forecast, the global surplus has continued to swell and prices have continued to fall.
