Special to WorldTribune.com
Russia for the first time publicly embraced talking to the OPEC oil cartel about jointly cutting global oil production by up to 5 percent to prop up collapsing oil prices.
Russian Energy Minister Alexander Novak told reporters on January 28 in St. Petersburg that he is ready for such talks, sending oil prices soaring by as much as 8 percent to $36 a barrel in London trading and buoying stocks on exchanges from New York to Shanghai.
“OPEC countries are currently trying to convene a meeting with the participation of member countries and nonmembers in February,” Novak said. “The question is being studied by different nations. From our side, we have confirmed the possibility of our participation.”
Novak’s remarks follow comments from Russian oil executives earlier this week advocating working with OPEC to try to reduce the glut of oil in world markets and bolster prices.
Novak’s public endorsement of cooperation with the oil cartel marks a reversal for Russia, which has previously shunned invitations to coordinate with OPEC. The Kremlin has previously argued that it is futile to try to counter entrenched economic trends like the current oil downturn.
According to Bloomberg News, OPEC delegates said they have no meeting planned with Russia.
In Washington, a White House spokesman said the move was a sign of Russia’s economic desperation and “weakness.”
The Russian ruble recently hit an all-time low against the U.S. dollar while its economy by all accounts remains mired in a long recession that started with the plunge in oil prices in 2014.
The economic woes are even more acute in Azerbaijan, which has seen street protests amid the fallout from oil prices that are down by nearly 75 percent from $115 in 2014.
But cutting production also would bring pain, as it would cut into export sales and government revenues in Russia and most other oil-producing countries. For Russia, the world’s top producer, a 5 percent output cut would reduce sales by around 500,000 barrels a day.
The loss of revenues from plunging prices is what prompted Russia and other producers to go flat out on production last year, with Russian output reaching an average of 10.73 million barrels per day, the highest level since the fall of the Soviet Union in 1991.
While skepticism still abounds that oil producers who are getting increasingly desperate for sales and revenues will agree to cut production, analysts took Novak’s comments as a sign that the possibility is being seriously considered.
“You have to take this seriously now. The key will be if Russia can deliver,” Gary Ross, a veteran OPEC watcher and founder of U.S.-based Pira energy group, told Reuters.
“Unconfirmed reports that Saudi Arabia has offered to cut oil output by up to 5 percent if Russia does the same should be taken seriously, if only because the two countries each produce around 10 million barrels per day. This represents almost 20 percent of global supply,” Julian Jessop, head of commodities research at Capital Economics, said in a note to clients.