Russia and OPEC agreed to freeze the level of oil production

Following the meeting, representatives of the ministries of energy of Russia, Qatar, Saudi Arabia and Venezuela, it was decided to freeze oil production at the level of 11 January, reports Bloomberg referring to the statement by the oil Minister of Saudi Arabia. In the energy Ministry of Russia confirmed this information, adding that countries involved in the negotiations, willing to freeze production if other manufacturers will do the same.

“Following the meeting, four countries — Russia, Saudi Arabia, Qatar and Venezuela — are willing to freeze oil production at the January level, if other manufacturers will join this initiative”, said Minister of energy Alexander Novak.

In the Ministry of energy of Qatar announced that it will be to monitor the implementation of the agreement. The representative of the Emirate said that on further measures of the country will think in the coming months. The Minister of oil of Saudi Arabia after the talks said the halt in production at the January level is “adequate”, while Saudi Arabia wants to satisfy the demand of the consumers.

According to the International energy Agency (IEA), Saudi Arabia produced in January, 10.2 million barrels per day: slightly less than at the peak in June 2015 10.5 million barrels per day. Russia produced about 10.9 million barrels per day in January, this record in the post-Soviet era.

A source in one of the major oil companies said that the selected date is very good for freezing extraction. “On January 11 was one of the highest production levels, in order to save, doesn’t need to bother”, he said.

Official representative of “Rosneft” Mikhail Leontiev said that the company sees no grounds for review, as it is not aware of the details of agreements reached by Ministers. “We don’t know the terms, don’t know on what conditions agree to freeze production of Russia, don’t know what other market participants”, — he said. “We have repeatedly expressed our position: the configuration of interests and positions of participants of the market are such that the reason for the fact that it has reached an agreement, we do not see”, — said Leontiev.
The representative “Gazprom oil” has not yet responded to the request . The representative of “Bashneft” also declined to comment.

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About the planned meeting in the Qatari capital Doha on the head of the energy Ministry of Russia Alexander Novak, Minister of oil of Saudi Arabia Ali al-Naimi and colleagues from Venezuela and Qatar, Eulogio del Pino and Mohammed al-Garden the day before Bloomberg reported.

News about the Russian-Saudi meeting has led to increased oil prices. During today’s trading on the stock exchange ICE cost of a barrel of Brent rose to $35,54, which is 6,43% above the closing level yesterday. The ruble also went to a rise at this news: the dollar fell below 76 rubles, euros for the first time in two weeks fell below 85 rubles.

After it became known that the talks in Doha was not decided on the reduction of hydrocarbon production, oil prices fell below $34 per barrel, the dollar and the Euro soared upwards.

About a possible meeting with representatives of OPEC, which may be questioned on the decrease in oil production, Novak said at the end of January 2016. He also added that trying to convene a meeting of OPEC members. The Minister then explained that Russia may consider the possibility of reducing oil production only if it will reduce all exporting countries.

Bloomberg noted that organized in Doha informal meeting recalls the events of “oil diplomacy” of the late 1990-ies, when the OPEC countries with the support of Mexico was able to negotiate the phased reduction of oil production volumes. Then, after the fall in oil prices in 1998 (with $25/bbl. in 1997, they dropped to less than $10/bbl. in 1998), OPEC made several attempts to influence the market by reducing its daily production first by 1.25 million barrels. in April, and then to 1.34 million barrels. in July, oil has continued to fall till the end of the year.

By March 1999, the cartel failed to agree on production cuts not only with their participants but also with the countries outside OPEC, Mexico, Norway, Russia and Oman. Total daily production was reduced to 2,1 million Barr., of which a decrease of 1.7 million barrels. had in OPEC. Common efforts brought results: by may 1999, the oil price recovered to $16/bbl., and the next year it rose to $30.

Again to coordinate their actions by OPEC and affiliated countries — the oil producers succeeded in 2001. Then oil prices were under attack after the recession of the American economy that followed the September terrorist attacks. During the year OPEC reduced oil production by 3.5 million barrels. a day, and the leadership of the cartel refused to cut supply by 1.5 million barrels., if they are not joined by other oil powers. As a result, Angola, Mexico, Norway, Oman and Russia agreed to reduce the daily volume of oil produced at 462 thousand barrels. per day (on Russia then had about 150 thousand barrels).