Oil rises on talk of Russia-OPEC meeting on output cuts

Following the further slide in oil price this month, there have been calls for a downward review of the oil benchmark price of $38 proposed by President Muhammadu Buhari for this year’s budget.

Oil surged by as much as 8% after Russia’s energy minister Alexander Novak told reporters in the country that officials from Moscow could meet with OPEC next month, and said that the Kremlin is willing to talk about a potential cut in production.

Venezuelan Oil Minister Eulogio Del Pino will visit Russia, Qatar, Iran and Saudi Arabia on a tour beginning on Saturday of OPEC and non-OPEC countries meant to drum up support for action to stem the tumble in crude prices.

He also, according to reports, confirmed that a meeting was proposed between OPEC and non-OPEC oil producing countries, and that Russian Federation was prepared to attend.

Brent futures have jumped over 25 per cent since their January low and are heading for their fourth straight session of gains.

Instead, he suggests a sustained recovery in oil prices would probably require “stronger foundations”.

Mr Ang told AFP “there could be some bullishness” coming from Russia’s plans to talk with Opec “but nothing concrete has been struck yet”.

The oil market is already suffering with a massive supply glut, thanks to Saudi’s “lower for longer” oil price strategy that it hopes will eventually drive out higher cost producers.

Oil price volatility has climbed to its highest since 2009 as traders try to price in an uncertain supply outlook after Russian Federation hinted it was open to coordinating output with OPEC just as Iran lifts exports following an end to global sanctions.

“The reduction in production in Russian Federation and Saudi Arabia (on the condition that both sides will reduce it – Gazeta.ru) would reduce global production by more than one percent”, Krylov said. Russia, the top non-OPEC producer has been struggling to cope with falling oil prices as it battles for market share with Saudi Arabia, the world’s largest oil producer.

“If they want to cut production they are welcome, we are not going to cut”, al-Naimi said, adding that the Saudis would hold that position “forever, not [just] 2015”.

With the organization effectively abandoning its output ceiling in December, Russia pumping at record levels and USA shale fields proving more resilient than forecast, the global surplus has continued to swell and prices have continued to fall.