(MUST READ) EXCESS CRUDE SUPPLY: RUSSIA, SAUDI ARABIA AGREE TO HALT OUTPUT BUT ON THIS CONDITION

 

There was renewed hope yesterday about the possibility of a rise in oil prices as the world’s top oil producers, Russia and Saudi Arabia, agreed to a production output freeze to tackle oil glut, as long as other countries are ready to do same.




Other producers such as Qatar and Venezuela have also expressed their readiness to keep oil production at January’s levels if other producers also do the same.

On Monday, the minister of State for Petroleum Resources, Dr Ibe Kachikwu, had disclosed that there was increased conversation between Organisation of Petroleum Exporting Countries (OPEC) members towards ending the current over-supply of crude with a view to raising the prices of the commodity after it fell to record low levels.

True to Kachikwu’s prediction, OPEC top producer Saudi Arabia, which led other members on a philosophy to drive higher-cost producers out of the market by refusing to cut production despite a supply glut, has eventually agreed to stop product over-supply.

The agreement came after a meeting in Doha yesterday as OPEC and non-OPEC members are now desperate to curtail the market trend, following the drop of oil prices below $30 a barrel in recent months, representing about 70 per cent decline since 2014.

The report from Doha, however, stated that the challenge now would be to get other producing countries, including Iran, to toe the line as well.

Iran’s IRNA news agency said on Sunday that the country had exported its first crude shipment to Europe since it reached a landmark deal last year with world powers.

The country’s deputy oil minister, Rokneddin Javadi, was quoted by the IRNA as saying the shipment, the first in five years, marked “a new chapter” in Iran’s oil industry.

Javadi said Iran had already reached an agreement to export oil to France, Russia and Spain.

The country said in January that it planned to add to its production, which stands at 3.1 million barrels per day (bpd) despite the drop in price, and should not be blamed for further price falls.

Meanwhile, Kachikwu had told Reuters in Abuja that the mood inside the OPEC is shifting from mistrust to a growing consensus that a decision must be reached on how to end the global oil price rout.

He said, “There’s increased conversation going on. I think when we met in December … they (OPEC members) were hardly talking to one another. Everyone was protecting their own positional logic.

“As you get closer to the statutory OPEC meeting dates, you are going to see a lot more people get active in those conversations and try to find solutions,” he further stated.

However, apparently trying to urge countries impacted by oil price fall to be realistic in their expectation over the recent development, a former adviser to Iraq’s Ministry of Oil and former head of the Energy Studies Department, OPEC Secretariat, Saadallah al Fathi, told Al Jazeera that freezing output at January’s levels was not going to immediately cut supplies.

“There is already too much oil on the market; I don’t think freezing production is going to mean anything, unless other producers come into the picture. Within the next few weeks or few months, I think there will be a flurry of activities to get other producers on board,” Fathi said.

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