Oil Barons Plan to Freeze Production So That Oil Price Increases to $50 Per Barrel

Oil freeze deal will be done by March: Russia

February 21, 2016

CNBC - Consultations on a preliminary deal between leading oil producers to freeze output should be concluded by March 1 after a group led by Russia and Saudi Arabia reached a common position this week in Doha, Russia's energy minister said.

In a television interview aired on Saturday, Alexander Novak also said that the agreement announced on Feb. 16 was weighty enough.

"Those countries which have openly supported this approach are producing around 75 percent out of global (oil) export volumes. My point is that, in practice, this is enough to agree," Novak told the "Vesti on Saturday" program.

Russia, Saudi Arabia, Qatar and Venezuela said this week after talks in Doha that they were ready to freeze production at January levels if other producers do the same.

Iran welcomed the deal. But it stopped short of saying it would itself freeze production at January levels and its deputy oil minister said on Saturday it would increase production soon.

Novak said talks between Venezuela and Iran were still ongoing, and said consultations would also be held with non-OPEC countries, including Mexico and Norway.

"I believe that they (Mexico and Norway) would take a constructive stance," he said.

Oil prices have crashed more than 70 percent in the past 20 months, driven by near-record production by the Organization of the Petroleum Exporting Countries (OPEC) and other producers, adding to one of the worst supply gluts in history.

Crisis-hit Venezuela has been pushing for an oil deal to offset a brutal recession that cost the leading Socialist Party its legislative majority in a December election.

If additional oil were not supplied to the market, then the global surplus of oil would fall by at least 1.3 million barrels per day, Novak added.


Novak said Iran had taken a relatively constructive stance on the Doha deal but not yet said it was ready to sign up to the proposals.

The country's Deputy Oil Minister Rokneddin Javadi was quoted as saying on Saturday that Tehran aimed to increase oil production by 700,000 barrels per day in the near future.

Iran has previously said it will not give up market share, having only just re-entered the oil market in January after U.S.-led international sanctions were lifted.

Alexey Texler, Russia's first deputy energy minister, said earlier this week that even without Iran there would be an effect from the deal.

According to Texler, Russia is talking about freezing January production levels. January output was around 1.5 percent higher than the annual average for 2015.

Novak also said it was "discussed with colleagues" that an oil price of $50 per barrel would suit consumers and exporters in the long term. He did not elaborate.

The minister believes that if the Doha agreement enters into force then Russia's market share would remain unchanged.

Meanwhile, Saudi Oil Minister Ali Al-Naimi will this week address the U.S. shale oil producers hit by OPEC's policy of maintaining supply levels in the face of a glut in order to depress oil prices and force out higher-cost producers.

Many commentators blame the Saudi-led policy for the 70 percent drop in oil prices, despite the fact that soaring U.S. shale output brought on by the hydraulic fracturing revolution also contributed to oversupply -
Naimi will deliver the keynote address on Tuesday at the annual IHS CERAWeek conference in Houston. It will be Naimi's first public appearance in the U.S. since OPEC's shock decision in November 2014 to keep heavily pumping oil even though mounting oversupply was already sending prices into free-fall.

Naimi has said previously this was not an attempt to target any specific countries or companies, merely an effort to protect the kingdom's market share against fast-growing, higher-cost producers.