Special to WorldTribune.com
Saudi Arabia and Russia are likely to agree to raise oil production next month in a bid to ease consumer worries about higher energy prices, their energy ministers have said.
Saudi Arabian Energy Minister Khalid al-Faleh and his Russian counterpart, Aleksandr Novak, both said at an economic forum in St. Petersburg on May 25 that they are prepared to roll back a landmark production freeze they put in place in 2016.
The energy ministers said any easing of the production freeze, which marked the first time in decades that Russia had worked with the oil cartel to limit production, would be gradual and occur in the second half of the year.
The joint production freeze was put in place to arrest a plunge in premium crude prices to below $30 a barrel in early 2016, and analysts said it largely succeeded in stabilizing prices in the $40 to $50 range.
But recently, largely as a result of U.S. moves to impose sanctions on major producers Iran and Venezuela, prices have soared back to levels not seen since 2014, rising as high as $80.50 a barrel in London trading earlier this month.
Prices fell more than 3 percent to $76.44 a barrel in London trading on May 25 after Saudi Arabia and Russia said they were ready to raise production to calm prices.
The sharp rise in crude prices has translated into significantly higher prices at the gas pump and prompted complaints from energy consumers, including U.S. President Donald Trump, who tweeted last month that the Organization of Petroleum Exporting Countries was “artificially” boosting prices with its production curbs.
It was because of Trump’s tweet that OPEC, which is dominated by Saudi Arabia, began discussing an easing of the curbs with Russia, OPEC’s Secretary-General Muhammad Barkindo told the St. Petersburg economic forum.
“We pride ourselves as friends of the United States,” Barkindo said. He added that it is not unusual for Washington to put pressure on OPEC to help lower prices.
China, the world’s largest energy consumer, has also raised concerns about whether enough oil is being pumped, the Saudi energy ministry said.
Saudi Arabia and Russia are currently the world’s two largest oil producers and are believed to have the most capacity to raise production.
The production cuts of about 1.8 mllion barrels a day agreed to jointly by Russia, OPEC, Kazakhstan, and other major producers in 2016 currently are scheduled to run through 2018.
Reuters reported that the ministers are considering rolling back about half the production curbs or 1 million barrels a day.
Novak said a production increase is called for because OPEC member Venezuela has fallen far short of its production targetby nearly 1 million barrels a day recently.
He said he will meet with OPEC ministers in June to discussion a production increase, which he said was likely and — just like earlier production cuts — should be “proportionate, for the sake of fairness” so that all producers can benefit from the increase.
“Different options will be put forward. But, it is likely that this will be a gradual easing,” Novak said in comments published on the Russian Energy Ministry website.
Novak is due to meet with OPEC ministers in Vienna on June 22 and 23.
Besides responding to complaints from energy consumers about higher prices, Russia and OPEC producers also have been concerned about how the nearly 20 percent spike in crude prices this year has prompted shale oil producers in the United States to ramp up production.