Why A Russian-Saudi Deal On Cutting Oil Output Remains Elusive
In Riyadh, the head of the state-owned oil company, Amin Nasser, told an industry conference on Tuesday to wait until the end of 2016 to see prices recover. Russian Deputy Prime Minister Arkady Dvorkovich said in Moscow that the country would be able to keep production stable for the time being, even at current prices.
Those comments ran counter to Iraqi Oil Minister Adel Abdul Mahdi, who said a deal was possible, without providing any details.
“This flexibility should be finalized, and we should hear some solid suggestions coming from all parties,” Abdul Mahdi told reporters at a conference in Kuwait City.
There is a precedent for a surprise agreement to turn around a chronically oversupplied oil market. When oil plunged to $10 a barrel in 1998-1999, Saudi Arabia and other oil producers for months said they wouldn’t to production. But behind the scenes, their diplomats were meeting in secret in cities from Miami to Madrid to arrange a series of output curbs that ended the rout.
Yet an agreement between OPEC and rival producers to rein in volumes has proven elusive as all parties seek to maintain their market share. Venezuela has repeatedly requested an emergency meeting of the Organization of Petroleum Exporting Countries to discuss production cuts, but others have rejected it.
Saudi Arabia, where energy policy is made against the backdrop of an increasingly bitter regional power struggle with Iran, has insisted that cuts can only happen with the cooperation of non-OPEC members. The fear: Iran, recently free of sanctions on crude output, will increase production as they cut back.
With OPEC effectively abandoning its output ceiling in December, Russia pumping near record levels and U.S. shale fields proving more resilient than forecast, the global surplus has continued to swell and prices have continue to fall.
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