Wednesday, January 27, 2016 9:05 pm
OPEC is renewing efforts among members and producers from outside the group for a deal to fix an oil glut and boost prices, but it is too early to say whether the attempt will work, OPEC sources said on Wednesday.
Such a deal has been mooted and dismissed for over a year and the lack of any supply restraint by the Organization of the Petroleum Exporting Countries and rivals such as Russia has helped send prices to a 12-year low close to $27 a barrel. But Russia’s expression of willingness to discuss with OPEC members sent prices upward later today.
Oil futures surged 5 percent after the comments by Nikolai Tokarev, head of oil pipeline monopoly Transneft, which gave the first hint of possible cooperation between the top non-OPEC oil producer and the cartel to try to reverse a record glut.
Brent crude rose $1.61 to $33.40 a barrel by 12:20 p.m. EST (1720 GMT), after a session low of $30.83. It was also boosted by U.S. demand following a blizzard.
Hopes of a production curb deal were raised on Tuesday when Iraq’s oil minister said top OPEC producer Saudi Arabia and Russia were showing new signs of flexibility about agreeing to tackle the oversupply in the market.
And Venezuelan President Nicolas Maduro announced on Tuesday that the country’s oil minister would tour OPEC and non-OPEC countries in a bid to drum up support for joint action.
OPEC delegates, including those from Gulf countries, speaking after Iraq’s comments, said Venezuela’s attempt to get everyone around the table for a deal faced challenges.
“Something is cooking but it might not be done fast. There is communication within OPEC trying to get all sides together,” one OPEC source said. “But the main challenge is Iran and Russia.”
Moscow, seen as key to any agreement, gave an indication Wednesday that it is open for deals and talks.
Russian officials said they would talk to Saudi Arabia and other OPEC countries about output cuts to bolster oil prices, the head of Russia’s pipeline monopoly said on Wednesday, remarks that spurred a sharp rise in prices.
But there was still a long journey from starting discussions to actual cuts by Russian oil producers, with many of them saying reducing output was technically very difficult and could lead to Russia losing market share to its competitors.
Tokarev said a meeting of oil executives and government officials in Moscow on Tuesday had reached the conclusion that talks with OPEC were needed to shore up the oil price.
“At the meeting there was discussion in particular about the oil price and what steps we should take collectively to change the situation for the better, including negotiations within the framework of OPEC as a whole, and bilaterally,” RIA news agency quoted Tokarev as saying.
“The main initiative is being shown by, of course, our Saudi partners. They are the main negotiators. That means that they are the ones we need to discuss this with first of all,” he was quoted as saying.
Venezuela has also requested an emergency OPEC meeting and the current OPEC president, Qatar’s Energy Minister Mohammed al-Sada, is seeking feedback from members on whether to hold one.
“The president is still awaiting answers,” the second OPEC source said.