Istanbul / AFP
President Vladimir Putin on Monday said non-OPEC member Russia was ready to work with the cartel in imposing measures to limit oil production, in comments that propelled the price of crude to its highest levels in a year.
Eyes have turned to Russia, the world’s top oil producer alongside Saudi Arabia, to see if it will join in a concerted effort alongside cartel members to prop up prices after OPEC last month agreed a surprise output cut in the hope of lifting rock-bottom prices.
Putin said at the World Energy Congress in Istanbul that such coordinated output curbs were the only way to balance the market after a prolonged period of low prices.
In response, Brent North Sea crude rose $1.53 to $53.45 a barrel, the highest level reached since October 2015.
“In the current situation, we believe a freeze or a cutting of the production of oil is the only way preserve the stability of the energy sector and accelerate a rebalancing of the market,” Putin said.
“Russia is prepared to join joint measures limiting production and calls on other exporting countries to do the same,” he added.
He expressed hope this would lead to a concrete agreement at a November OPEC meeting and that this idea would be a “positive signal to the market and investors”.
Russian Energy Minister Alexander Novak is expected to attend an informal meeting of OPEC energy ministers in Istanbul on Wednesday in a sign of increasingly tight cooperation with the cartel.
The period of low oil prices has been hugely damaging to economies like Russia which has failed over the last years to reduce its dependence on hydrocarbon exports for revenues.
Putin raised alarm that if the current trend of low prices continued, it could lead to a “chronic” lack of financing in the sector which could in turn lead to unpredictable flare-ups in prices.
“Russia as prominent energy power will always make its contribution to stable development,” he said, insisting that even in the current difficult times Russia was still investing in oil extraction.
Putin is making his first trip to Turkey following a crisis sparked by the shooting down of a Russian war plane over the Syrian border last November. He will later hold talks with President Recep Tayyip Erdogan.
‘$60 oil not unthinkable’
The energy minister of OPEC kingpin Saudi Arabia, whose assent allowed the output cut to go ahead, meanwhile expressed cautious optimism the price of crude could rise to $60 dollars a barrel by the end of the year.
“We are seeing the convergence of supply and demand,” said Khalid al-Falih. “It is not unthinkable we could see $60 (a barrel) by the year end.”
Oil has for months pressured by concerns of slack demand amid a global economic slowdown at a time of a glut in supply in particular in the United States.
But this minister warned OPEC against the temptation of drastic output cuts to push up prices.
He added: “OPEC should make sure not to crimp too tightly and create a shock to the market.
“We do not want to shock the markets into a process that could be harmful.”
The minister admitted that the kingdom had become “a little fat around the belly, a bit complacent” during the era of high oil prices but was now fully committed to its economic reform programme set out by Deputy Crown Prince Mohammad bin Salman.
“The kingdom will be prepared to deal with whatever price emerges,” he said.
The minister said he was expecting to meet Novak in Istanbul. “I look forward to russia playing a constructive role,” he said.
Nicolas Maduro, President of OPEC member Venezuela which has seen its economy battered by the low oil prices, said a “new mechanism” was needed to keep up prices.
“We need a new mechanism. The oil world needs realistic and fair prices.”
Referring to the upcoming OPEC talks on Wednesday he expressed hope that “the energy ministers can reach an agreement and through this agreement we hope there can be an alliance among producers.”