Russia and OPEC member-states – Qatar, Venezuela and Saudi Arabia – have agreed to freeze oil production at the level of January 11 at a meeting today in Doha.
The Russian Federation was represented by the Minister of Energy Alexander Novak. "After the meeting, four countries – Russia, Saudi Arabia, Qatar and Venezuela – are willing to freeze oil production at the level of January, if other manufacturers join the initiative," RBC cited him as saying.
The Ministry of Energy of Qatar said that it will be monitoring the agreement on oil production freeze.
The agreement reached has already had an impact on world oil markets. In the morning, the price of Brent rose to $35.54. However, the results of the negotiations reduced it to $33.7 per barrel.
The deputy director of energy policy of the Institute of Energy and Finances, Alexey Belogoriev, in an interview with a correspondent of Vestnik Kavkaza noted that at the moment it is difficult to say how this decision will affect the situation in the world market. "Those prices, which we saw in the last two weeks, were due to expectations of an agreement between Russia and Saudi Arabia. Therefore, if everything remains at the current level, we can hardly wait for the sharp movement of quotations. And then it all depends on how this issue will develop, as long as we are talking about freezing production at a very high level. So I would not say that this will be a positive signal for the market. It is a signal, which could lead to a drop in prices," he explained.
"And then it all depends on how all this will be fulfilled by Saudi Arabia. To date, there are two countries in OPEC that are not interested in production cuts – Iran and Iraq, but if they continue to increase production, but Saudi Arabia freezes it, it will not have a major impact on the market," the expert added.
"For Saudi Arabia, the level of 2 million barrels, which it had on January 11, is rather high. But for Russia 1 million barrels is a very high level. We rather expected a decline in production this year, rather than maintaining the level of 2015. Therefore, Russia will reduce the level of oil production, but more likely due to a lack of the necessary investment," he noted.
"If it will be decided to decrease production, everything depends on the amount. Russia can safely reduce production to 200-300 thousand barrels per day. But it is not only about Saudi Arabia and Russia, but also about other exporting countries, especially Iran," the expert said.
Sberbank CIB analyst Valery Nesterov, in his turn, regarded "the fact that representatives of Saudi Arabia and Russia met and discussed these issues" as positive. "But the practical significance of today's agreement at this stage seems very doubtful. Because the reservation, that countries are willing to freeze oil production if other manufacturers join the initiative, virtually reduces everything to nothing, because such countries as Iran and Iraq are unlikely to join the initiative," he complained.
"The fact is that the growth rate in Russia is already low, somewhere around 1% per year, and this year, perhaps, it is expected to fall. Saudi Arabia is producing at maximum capacity today. But this is not desirable for Iran, which has increased oil production by 200 thousand barrels and announced its intention to increase it by another 200 thousand barrels, as well as for Iraq, whose production level is not responding to the level planned by the Iraqi government," the expert explained.
"The second part of the problem lies in the historical distrust between OPEC member countries, their non-compliance with its obligations. Even if tomorrow other OPEC member countries join the initiative, it will still be difficult to control the level of oil production," he added.
"Finally, we forget that now the main players in the market are, above all, Saudi Arabia and the United States. In the US, where shale oil producers are holding back the production, it is reduced in some places, but there are a large number of wells which are ready to be launched," the analyst said.
"Therefore I'm cautiously optimistic, I believe that today's agreement is a positive development, but the prospects for the implementation of the plans, due to which an agreement was reached today, are very vague," Valery Nesterov concluded.
