Saudi Arabia
and Russia, the world’s two largest crude producers, agreed to freeze output
after talks in Qatar.
The
deal to fix production at January levels will be “adequate” and #Saudi_Arabia
still wants to meet the demand of its customers, Oil Minister Ali Al-Naimi said
in Doha after the talks with Russian Energy Minster Alexander Novak.
Qatar and
Venezuela also agreed to participate, Al-Naimi said. The freeze is conditional
on other nation’s agreeing to participate, Russia’s Energy Ministry said in a
statement. Oil pared gains in London, after rising before the meeting amid
speculation the countries would discuss production cuts.
“This
is an announcement of a production freeze among countries whose production
didn’t even grow recently,” said Eugen Weinberg, head of commodities
research at Commerzbank AG in Frankfurt. “If Iran and Iraq are not a part of
the agreement, it’s not worth much -- and even then there is still a question
of compliance.”
More than a
year since the Organization of Petroleum Exporting Countries decided not to cut
production to boost prices, oil remains about 70 percent below its 2014 peak.
Supply still
exceeds demand and record global oil stockpiles continue to swell,
potentially pushing prices below
$20 a
barrel before the rout is over, Goldman Sachs Group Inc. said last week.
Iran,
OPEC’s fifth-largest producer, ruled
out any
curbs on its oil production when the group met in December. It plans to boost
output and exports by 1 million barrels a day this year following the lifting
of international sanctions last month. This week the nation loaded its first Europe-bound crude cargo in
four years.
Iraq continues
to boost production as it recovers from years of conflict and under investment.
The nation’s output reached a record 4.35 million barrels a day in January and
more increases could follow, according to the International Energy Agency.
Brent
crude was 2 percent higher at $34.06 a barrel at 10:01 a.m. in London, having
earlier climbed as much as 6.5 percent.
Better
Foundation
"A
freeze would not create an immediate U-turn, but it creates a better foundation
for the price recovery in the second half," Olivier Jakob, managing
director of consultant Petromatrix GmBh, said in a note to clients before the
meeting concluded.
The
freeze deal comes after months
of competition for market share between Russia and Saudi Arabia.
Riyadh has taken the rare step of selling crude into Moscow’s backyard of
eastern European, while Russia overtook Saudi Arabia in oil exports into China.
The two nations are also backing opposite sides in the Syrian civil war.
According the
IEA, Saudi Arabia produced 10.2 million barrels a day in January, below the
most recent peak of 10.5 million barrels a day set in June 2015. Russia
produced nearly 10.9 million barrels a day in the same month, a post-Soviet
record, according to official data. Venezuela pumped 2.4 million barrels a day
and Qatar produced 680,000, according to the IEA.
Qatar
will lead monitoring of the output freeze agreement, the nation’s Energy
Minister Mohammad bin Saleh al-Sada said at a press briefing. Low oil prices
haven’t been positive for the world, he said.
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