Cooperation Between OPEC and Russia Driving Oil Higher

“It is vital the market addresses the issue of the stock overhang”. The price was also hit by figures showing record oil output from Iraq in December.

Additionally, the Iraqi oil minister, Adel Abdul Mahdi, said there are signs that top oil exporters Saudi Arabia and Russian Federation have become more flexible in considering a production cut, according to the news outlet.

OPEC Secretary General Abdalla El-Badri said from London the crude oil market is going through a “significant readjustment” as free capital vanishes and supplies build in a weakened global economy. Saudi Arabian Oil Co.is spending as much now as it did before the crash in crude prices, Chairman Khalid Al-Falih said Monday.

The head of Opec has laid the blame on smaller oil-producing countries for the glut in supply swilling through global markets that has driven down prices. The five-year average level of commercial stockpiles in the Organization for Economic Cooperation and Development rose to a surplus of more than 260 million barrels at the end of 2015 from a negative 85 million barrels in 2013, he said.

The commentary came as state-backed giant Saudi Aramco declared confidence prices would soon trend higher as high cost producers exit the market.

Mr Fedun said OPEC will be forced to cut output anyway. In the US, one of OPEC’s largest production rivals, a further drop in the number of oil rigs was expected to weigh on output.

“Given how this developed, it should be viewed as something Opec and non-Opec tackle together”. He said it was crucial that major producers came up with a solution, as the market needed to see inventories come down to levels that would allow prices to recover and encourage investments.

Al-Badri warned the current glut is setting the stage for a future supply shock, with prices lurching from one extreme to another in a deranged market that is in the interests of nobody but speculators.

This tendency comes as lower crude oil prices are pressuring investments necessary to sustain robust production in key non-OPEC producers like the United States. The over-supply will narrow to 1.2 million bpd in the first quarter as of this year as a string of OPEC and non-OPEC countries reach “pain points”, despite the return of Iranian crude after the lifting of sanctions.

Venezuela has requested OPEC hold an emergency meeting to discuss steps to prop up oil prices.