Saudi Arabia and Russia, the world’s biggest crude oil producers, joined Venezuela and Qatar in an agreement to freeze output in an effort to revive prices from a 12-year low. Whether the deal succeeds will depend on Iran, Iraq and other large exporters joining in. This is what some of the world’s biggest producers said after the deal:
Iran, unshackled from sanctions last month, “will not forgo its share of the market,” Oil Ministry news service Shana reported, citing Oil Minister Bijan Namdar Zanganeh. He will meet his counterparts from Iraq and Venezuela in Tehran today. Iran is the fifth-biggest producer in the Organization of Petroleum Exporting Countries, pumping 2.86mn bpd in January. It was producing at 3.8mn bpd in 2010, before international sanctions were imposed on its exports. Iran plans to increase daily exports by 1mn barrels this year.
Iraq, Opec’s second-largest producer, is ready to join Saudi Arabia in freezing oil output, or even cut, if other producers commit to the accord, said an official who asked not to be identified because oil policy is private.
Oil Minister Adel Abdul Mahdi said on January 26 that Saudi Arabia is showing more flexibility on the issue of output cuts. Iraq increased production to 4.37mn bpd in January from 2.4mn in the beginning of 2010 as it seeks to rebuild following years of war and under-investment, according to data compiled by Bloomberg.
Kuwait, Opec’s third-biggest producer, will join the accord and freeze production at 3mn bpd, said a person with direct knowledge of the country’s plans who asked not to be identified. The agreement should last at least three months because Opec needs to understand the market’s reaction and give time for stocks to fall before it can consider cutting supplies, the person said.
The deal to freeze output “is simply the beginning of a process to assess in the next few months and decide whether we need other steps to stabilize the market,” Saudi Arabian Oil Minister Ali al-Naimi said after meeting his Russian, Qatari and Venezuelan counterparts in Doha. “We want a stable oil price.”
Al-Naimi’s comments fed speculation that the world’s biggest oil producers could eventually take action to revive prices. The kingdom has so far resisted making any cuts in output to boost prices, arguing that it would simply be losing market share unless its rivals also agreed to reduce supplies.
“We will start intensive communication almost straightaway with other major producers, Opec and non-Opec, including Iran and Iraq,” Qatar’s Minister of Energy and Industry HE Dr Mohamed bin Saleh al-Sada said after the meeting in Doha yesterday. Qatar will lead monitoring of the output freeze agreement.
Qatar is among Opec’s smallest oil producers, and the world’s largest liquefied natural gas exporter. Most natural gas contracts are linked to oil prices and a slump in prices affects Qatar’s economy. The nation has taken over from Algeria in attempting to broker a deal between the world’s biggest oil producers to limit supply.
The Latin American nation is among the worst hit by oil’s slump amid concerns the government may default on its debt. The nation has been attempting to get its fellow Opec members and Russia to cut production for months. Oil Minister Eulogio Del Pino was part of the talks in Doha yesterday and will continue his efforts in meetings with officials from Iraq and Iran today, he said.
Russia will cap output if other producers join, according to a statement issued by the Russian Energy Ministry. Rosneft, the country’s largest oil producer, still has questions about the deal and its terms, vice-president Mikhail Leontyev said by phone from Moscow. Saudi Arabia and Iran would need to give viable guarantees, he said.
Russia is pumping crude at record levels of about 10.9mn bpd in January. The country would face technical constraints in cutting production in the winter because of the risk that pipelines would freeze.
Azerbaijan has no plans to freeze its oil production, Natiq Abbasov, the country’s deputy energy minister, said by e-mail.
“Azerbaijan isn’t a large oil producer. So cutting or freezing output won’t change anything,” he said. The country produced 794,000 bpd of crude in December, according to data compiled by Bloomberg.
Saudi Arabia’s Oil Minister Ali al-Naimi (centre) and Qatar’s Energy Minister HE Dr Mohamed bin Saleh al-Sada speak to the media following a meeting with Russia’s Energy Minister Alexander Novak, and Venezuela’s Oil Minister Eulogio del Pino in Doha yesterday. Saudi Arabia and Russia, the world’s biggest crude oil producers, yesterday joined Venezuela and Qatar in an agreement to freeze output in an effort to revive prices from a 12-year low.