Russian Federation ready to meet with OPEC over low oil prices

“But overall we expect a rebound in oil prices”.

US energy firms continued to cut the number of oil rigs this week, the sixth straight week for doing so, according to the data released Friday by oil service company Baker Hughes. Both Saudi Arabia and Russian Federation have faced economic headwinds because of the low price of crude oil.

Oil pared gains near a three-week high as Russian Federation said that although it’s prepared to discuss output with the Organization of Petroleum Exporting Countries, no action is now planned.

Speaking to CNBC’s Capital Connection on Friday, Citigroup’s Head of Asia Commodity Research, Ivan Szpakowski said that the shutdown of shale wells and the subsequent support in oil prices as envisioned by Saudi Arabia is a “questionable victory” because unlike traditional oil and gas production, shale production can be ramped up fast.

Brent crude advanced more than 5% to around US$35 per barrel, whilst West Texas Intermediary gained 5.5% to just over US$34.

OPEC set aside its output target of 30 million barrels a day at its December 4 meeting in Vienna.

Up until now, the big players have signalled that they would rather draw on financial reserves to see out the current spell of low oil prices than surrender market share to competitors.

“It’s possible that Russian Federation could be testing the waters to gauge how OPEC members would respond to the idea of cuts”, Jason Bordoff, director of the Center on Global Energy Policy at Columbia University and a former senior oil official at the White House told Bloomberg. Novak stressed it is “too early” to call anything a concrete agreement.

Russian Federation isn’t officially a member of OPEC, but has been invited to meetings as an observer.

Spending on global oil and gas exploration and production will fall nearly 20 percent this year to about $450 billion, according to consultant Wood Mackenzie Ltd, and independent USA explorers are expected to report losses totaling more than $15 billion this earnings season.

“The oil markets have been in turmoil now for 16 months, with January 2016 trading the most tumultuous we have seen in years”, said Edison analyst Ian McLelland.

Iran plans on increasing its oil output by 500,000 barrels per day and boosting exports, making any agreement among OPEC nations to slash its output incrementally hard to achieve.

“Indeed, these parameters were proposed, to cut production by each country by up to 5 percent”, Novak said when asked if Saudi Arabia had made a proposal to cut output.