Venezuela oil minister to visit Russia, Saudi Arabia on foreign tour

Oil edged up above $34 a barrel on Friday, a gain of some 25 percent from the 12-year lows seen earlier in January, on hopes that a deal between major exporters to cut production could help reduce one of the worst oil gluts in history.

Oil soared on Thursday after a Russian official said Saudi Arabia had proposed that oil-producing countries cut output by up to 5 per cent each amid a massive supply glut in the world market that has depressed prices for a year and a half.

A decision on cutting oil production is possible only if all crude-exporting nations are in agreement and there’s no timing for talks, Russia’s Energy Minister Alexander Novak said.

“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.

On Thursday, Novak’s deputy Alexei Texler said that a further drop in oil prices would strain both the oil producers and the state budget.

But cheap oil has caused economic pain in many producer countries, especially in West Asia and South America.

“This is a subject for discussions, it’s too early to talk about it”, he said, adding “We think it’s reasonable to discuss the situation”.

Saudi Arabia’s strategy to keep production high has crippled other Opec producers such as Venezuela who rely nearly exclusively on oil revenues to keep their country’s economy afloat.

“There have been attempts in the past that have come to (nothing)”. According to Tokarev, OPEC is likely to hold the meeting in February, with oil production decrease on the agenda.

The publication, citing “a source familiar with Iranian thinking”, noted that Iran lost out on 1.1 million barrels per day it could have exported due to global sanctions that are now lifted. In order to preserve its share of the oil market, the Kingdom, which is the most influential member of the oil cartel OPEC, has refused to cut its output since mid-2014 when prices began falling. Four OPEC delegates also said yesterday that no gathering has been arranged.

The Energy Information Administration said on Wednesday that USA crude inventories climbed by 8.4 million barrels last week, higher than analyst expectations for a rise of 3.3 million barrels. “So we have to go back to our share of the market”, a source familiar with Iranian thinking said on Thursday.