Russia wants to talk to OPEC about output cuts to bolster oil price - Mr Tokarev
Mr Nikolai Tokarev the head of Russia's pipeline monopoly said that Russian officials have decided they should talk to Saudi Arabia and other OPEC countries about output cuts to bolster oil prices, remarks that helped spur a sharp rise in world prices.
Oil futures surged more than 5 percent after the comments by Mr Nikolai Tokarev, head of oil pipeline monopoly Transneft, which gave the strongest hint yet of possible cooperation between the top non-OPEC oil producer and the cartel to try to reverse a record glut.
Brent crude rose by over USD 2 to USD 32.95 a barrel, after a session low of USD 30.83. It was also boosted by U.S. demand following a blizzard.
But there was still a long journey from starting discussions to actual cuts by Russian oil producers, with many of them saying reducing output was technically very difficult and could lead to Russia losing market share to its competitors.
Mr Tokarev said that oil executives and government officials meeting in Moscow on Tuesday had reached the conclusion that talks with OPEC were needed to shore up the oil price.
He said that "At the meeting there was discussion in particular about the oil price and what steps we should take collectively to change the situation for the better, including negotiations within the framework of OPEC as a whole, and bilaterally."
He added that "The main initiative is being shown by, of course, our Saudi partners. They are the main negotiators. That means that they are the ones we need to discuss this with first of all."
He said output cuts would be on the agenda for talks with OPEC countries: "Yes, that is one of the levers or mechanisms that would allow us to in some way balance the oil price."
An energy ministry representative confirmed to Reuters that possible coordination with OPEC had been discussed at the meeting, which the ministry hosted.
The Energy Ministry official said that "The meeting participants discussed the possibility of coordination of actions with OPEC members amid unfavorable market conditions on the global oil market."
Low prices pressure
Oil prices have fallen from around USD 115 in the middle of 2014, causing problems for Russia's cash-strapped budget and pushing the Russian economy into recession. Some members of the Organization of the Petroleum Exporting Countries want coordinated output cuts to push up the price, and they have been pressing Russia to play its part.
If discussions with OPEC begin in earnest, that would be a major reversal in Russia's stance. Russian production reached a new post-Soviet high in December of 10.80 million barrels per day. That puts it on par with Saudi Arabia, OPEC's biggest producer, which also pumps more than 10 million bpd.
OPEC, which collectively accounts for a third of global output, failed to agree any cuts at a meeting last month, with the Saudis apparently determined to maintain their market share and drive out high-cost producers in the United States.
Iran, previously kept from international markets by sanctions lifted this month, is also planning to increase its production rapidly into a world that produces 1.5 million barrels per day more than it consumes and has been running out of capacity to store it cheaply.
So far, within OPEC, only Algeria and Venezuela have clearly expressed support for a production cut.
However, Iraq, OPEC's second biggest producer after Saudi Arabia, also showed signs on Wednesday of softening its stance. Finance Minister Hoshiyar Zebari told Reuters in an interview that Baghdad was ready to take part in an extraordinary OPEC meeting and even reduce its oil output if all OPEC members and non-OPEC producers agree.
Industry reluctant
Considerable obstacles remain to cutting Russian production. Speaking to Reuters before the meeting at the energy ministry took place, two senior officials said no groundwork had been laid for cooperating with OPEC on output.
One of the officials, who spoke on condition of anonymity, said that "There are not any measures on possibly cutting production being discussed now."
Another official, who spoke on condition of anonymity because of the sensitivity of the matter, echoed that.
The second source said that "It is impossible to coordinate the process and stop production in Russia."
Source : CNBC