Putin voices support for efforts to limit oil production
Oil prices rose as Russia prepared to join other producers in limiting output to stabilise the energy market.
Russian President Vladimir Putin sent oil prices rising Monday by voicing his support for curbs on petroleum output, a prospect that has proved difficult for Moscow to carry out in the past.
Mr Putin said Russia, which pumps more crude oil than any other country, was ready to “join common efforts to limit oil production and urges others to as well.” His comments came a little more than a week after the Organization of the Petroleum Exporting Countries, a 14-nation cartel that doesn’t include Russia, agreed to a modest cut in its collective output of 1 per cent to 2 per cent.
“We believe freezing or even reducing oil production is the only way to save the stability of the energy sector,” Mr Putin told an energy conference in Istanbul, speaking through a translator.
Mr Putin’s pledge underscored the increasing intensity of efforts by big oil-producing countries to prop up crude prices that have sagged below $US50 a barrel for much of 2016, falling by more than half from levels of over $US100 a barrel in 2014. For more than two years, Russia, Saudi Arabia and other producers have pumped full tilt in a brutal campaign for market share in the face of low prices, but they have become willing to tweak their strategy in recent days.
Obstacles to a deal remain steep, and Russia failed to follow through on previous promises to cut production after the Sept. 11, 2001, terrorist attacks and the 2008 financial crisis. Crude is Russia’s main export and, along with natural gas, accounts for around 40 per cent of federal budget revenues.
Freezing weather conditions and high water content in Western Siberian oil make production cuts technically difficult to carry out. The Russian government dominates the industry, but there are several independent producers, including No. 2 producer PAO Lukoil.
“Russia’s capability to cut production looks pretty limited,” said Alexander Kornilov, an energy analyst at Aton brokerage in Moscow. He said production cuts could happen by postponing the development of new fields.
Still, a flurry of activity in Istanbul buoyed crude prices, with the US benchmark jumping about 3 per cent to $US51.58 Monday, flirting with a new high for the year.
Mr Putin’s energy minister, Alexander Novak, is scheduled to meet on Wednesday with his Saudi Arabian counterpart, Khalid al-Falih, and other oil ministers to discuss production cuts. According to people familiar with the matter, OPEC wants Russia to cut 200,000 to 300,000 barrels a day from its current production of 11.1 million barrels a day.
Mr Falih said he was optimistic major oil producers could agree to cut production by Nov. 30, when OPEC next meets in Vienna. He said it wasn’t “unthinkable” that prices could rise almost another 20 per cent this year to $US60 a barrel.
“I think the role of responsible producers around the world, and Saudi Arabia considers itself to be the leading one, is to try to balance supply and demand in a very responsible way,” Mr Falih said at the World Energy Congress in Istanbul.
The participation of Russia in oil-output cuts would represent a new front in efforts to bring the world’s oversupply of petroleum back into balance with demand and boost prices. A wave of American oil — unlocked by hydraulic-fracturing and horizontal-drilling techniques — sent prices skittering to the lowest prices in over a decade this year, a glut that OPEC and Russia added to with at or near record output.
Faith Birol, the executive director of the International Energy Agency, said Monday that the oil market should shift from oversupply into balance in the second half of 2017. A deal among oil producers “may hasten the process,” he said in Istanbul. “We may see it earlier.”
OPEC Secretary-General Mohammed Barkindo said a lot had changed since the days when Russia reneged on past deals. “We cannot live in the past, “ he said in Istanbul.
Earlier this year, Russia was among the most vocal proponents of a so-called production freeze, which would have restricted output to certain levels. The idea was scuttled at the last minute over disagreements between Iran and Saudi Arabia during a meeting in Qatar in April.
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