Oil prices rise amid possible declining output

Major oil-producing countries, including Saudi Arabia and Russian Federation, which were previously disinclined to agree upon a cut in production to support prices, have begun to feel enough pressure to at least talk about the possibility of limiting current output levels.

Saudi Arabian officials did not immediately comment on the proposal but a senior Gulf OPEC delegate said: “Gulf OPEC countries and Saudi Arabia are willing to co-operate for any action to stabilise the global oil market”.

Brent March futures, which expired on Friday, closed at $34.74 a barrel, 85 cents or 2.5 percent higher. Prices hit their lowest level for more than 12 years last week.

Iranian Oil Minister Bijan Zanganeh, attending a Franco-Iranian summit in Paris on Thursday, said Iran had not been contacted by Russian Federation about any cuts in output.

The Organization of the Petroleum Exporting Countries is considering a request from cash-strapped Venezuela to hold an emergency meeting. In order to start working through these issues, we need general agreement, it’s too early to talk about that. As rumours of a deal to cut supplies send oil prices surging yesterday.

In mid-January data appeared, which showed that Saudi Arabia’s oil exports had grown in November by 4.8 percent to 7.719 million barrels per day.

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.

These numbers indicate Russian producers can withstand prices as low as even $20 per barrel without them having a significant impact on production in 2016.

Russia’s oil production amounted to 10.95 million barrels per day in 2015, according to the Energy Information Agency’s (EIA) estimates.

The two countries’ opposing views on Syria, where Russian Federation is President Bashar Al-Assad’s closest ally and Saudi Arabia seeks his removal, present another diplomatic obstacle.

On Tuesday the Kuwaiti and Iraqi oil ministers said that OPEC will not cut production unless producers outside the cartel do the same, despite the plunge in crude prices.

Crude oil prices rallied in response to the sense of optimism from the United States, where labor has improved despite weakness elsewhere in the global economy.

Novak also said that it was reasonable to discuss the situation in the oil market and that OPEC was trying to organize a meeting with other producers next month.