Putin Meeting with Deputy Crown Prince, Second Deputy Prime Minister, Defence Minister of Saudi Arabia Mohammad bin Salman Al Saud in Sochi, Russia on 11 October 2015. Russian and Saudi officials have been meeting a number of times to discuss the oil glut and other regional issues [PPIO]
Russian President Vladimir Putin late on Monday announced that his country is ready to back a Saudi Arabian plan to curb oil production output in a bid to raise subdued oil prices.
We are “ready to join in joint measures to limit output and calls on other oil exporters to do the same,” Putin said.
Putin made the announcement while attending the world energy Congress in Istanbul, Turkey.
He added that a cut or production freeze was the best option to stabilize oil prices.
Both Russia and Saudi Arabia are considered the world’s largest oil producers and an agreement between the two energy giants is likely to create a paradigm shift in energy markets.
Putin’s remarks came shortly after Saudi Energy and Industry Minister Khalid Al-Falih said he was optimistic oil prices could rise to $60 a barrel by the end of 2016.
Oil prices jumped by about three per cent late on Monday but drifted downward early on Tuesday after some investment companies warned that increased production from countries such as Iraq, Libya and Nigeria may not adhere to production quotas. There has been similar dissent in the Organization of Petroleum Exporting Countries before.
“An agreement to cut production, while increasingly likely, remains premature given the high supply uncertainty in 2017 and would prove self-defeating if it were to target sustainably higher oil prices,” Goldman Sachs investment analysts warned on Tuesday.
At press time, international benchmark Brent Crude fell 0.98 per cent from its one-year high to $52.62 a barrel while West Texas Intermediate was trading at $50.90.
Last week, meeting on the sidelines of the 15th International Energy Forum in Algeirs, OPEC agreed to reduce their oil output to 32.5 million barrels per day (bpd) from the current production levels of around 33.24 million bpd.
Oil prices surged then, as well, before subsiding on warnings that the suggested cuts were too token.
Reducing daily output for all 14 members by a cumulative 750,000 to 900,000 barrels may be insufficient to return oil prices above the $60 bpd mark as some had predicted for 2017.
OPEC is already producing over its previously agreed level of 31.5 million bpd.
It is also unclear which countries would have to make the cut. Iran, for example, has insisted it will make no production cuts as it tries to revive its oil industry to pre-sanctions levels.
The BRICS Post with inputs from Agencies
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