World’s top oil producers Saudi Arabia and Russia agreed to freeze crude output at January levels after a meeting on Tuesday in Qatar, alongside OPEC producers Venezuela and Qatar, Kallanish Energy learns.
Saudi Arabia’s oil minister Ali Al-Naimi said the production cut agreement would be “adequate,” while Russia’s oil minister Alexandre Novak highlighted the deal is conditional to other nation’s participation such as Iran and Iraq.
“We don’t want significant gyrations in prices, we don’t want reduction in supply, we want to meet demand, and we want a stable oil price. We have to take a step at a time,” Al-Naimi told reporters.
Qatar energy minister and OPEC president Mohammad bin Saleh al-Sada said in a press briefing that low oil prices haven’t been positive for the world, and his country will lead the monitoring of the production freeze agreement.
Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt, told Bloomberg “this is an announcement of a production freeze among countries whose production didn’t even grow recently. If Iran and Iraq aren’t a part of the agreement, it’s not worth much — and even then there is still a question of compliance.”
Industry sources believe the impetus to agree on price-boosting output cuts has been induced by budget struggles in the world’s two largest oil producers – Russia and Saudi Arabia.
Chris Weston, chief market strategist at IG said “the noise around potential production cuts is hugely elevated; if we don’t see a cohesive response in a month or so, the speculators will no doubt start to ramp up short positions again.”
In January, Saudi Arabia produced 10.2 million barrels a day (MMBPD), which is slightly lower than the most recent peak of 10.5 MMBPD, while Russia produced nearly 10.9 MMBPD – a record-high level.
Following the meeting’s announcement, Brent crude was trading 2.4% higher in London at $34.20 a barrel (Bbl), having earlier climbed as much as 6.5%.
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