Saudi and Russia near deal to slash oil output
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SAUDI Arabia and Russia are close to a deal on oil output cuts to reduce a global glut, a Russian oil negotiator said yesterday, but details such as how to share out production curbs remained unclear ahead of talks planned for later this week.
A supply deal between OPEC and Russia and other producers that had propped up oil prices for three years collapsed in March, while the coronavirus hammered demand.
Riyadh and Moscow blamed each other for the failure and launched a battle for market share, sending oil prices to their lowest in two decades that has strained budgets of oil producing nations and hurt higher-cost producers in the United States.
US President Donald Trump said last week he had brokered a deal with Moscow and Riyadh. But initial plans for an OPEC+ meeting yesterday were delayed, with two OPEC sources saying a video conference would now be held on Thursday.
“I think the whole market understands that this deal is important and it will bring lots of stability ... to the market, and we are very close,” Kirill Dmitriev, one of Moscow’s top oil negotiators who also heads Russian’s sovereign wealth fund, told CNBC.
Dmitriev was the first to make a public declaration last month about the need for an enlarged supply pact, potentially involving producers outside the OPEC+ group.
Trump has said a deal could see cuts of 10 to 15 percent of global supply, although analysts say even such a huge reduction would still not solve the immediate problem of oversupply which by some estimates has crashed by 20 to 30 percent.
Russia and Saudi Arabia have long been frustrated that curbs by the Organization of the Petroleum Exporting Countries and others have left a gap that has been filled by shale oil firms in the United States, which became the world’s biggest producer.
Producers also differ over the level from which they should make any output cuts. Riyadh, with by far the world’s biggest reserve of extra capacity, has insisted it will no longer carry what it considers an unfair burden of cuts.
Russia President Vladimir Putin has said the base should be production levels in the first quarter.
In its race to secure a bigger share of the market after the OPEC+ deal fell apart, Saudi Arabia raised its crude output to 12.3 million bpd on April 1 and planned to export more than 10 million bpd from April.
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