Russia, Saudis tentatively offer to freeze oil output levels

The Saudi and Russian oil ministers, along with their Venezuelan and Qatari counterparts, “agreed to freeze the production at (the) January level provided that other major producers follow suit”, Qatar’s Energy Minister Mohammed bin Saleh al-Sada said.

“Such negotiations to freeze or curb [oil extraction] are not conducted directly with OPEC as it is”.

While the deal is preliminary and doesn’t include Iran, it’s the first significant cooperation between OPEC and non-OPEC producers in 15 years and Saudi Arabia said it’s open to further action.

Feb 16 OPEC member Iran could be offered special terms under a global deal to freeze oil production levels, two sources familiar with the matter said on Tuesday.

The official quota for OPEC oil production stand at 30 million barrels per day. “We want a stable oil price”, he added.

“The reason we agreed to a potential freeze of production is simple: it is the beginning of a process which we will assess in the next few months and decide if we need other steps to stabilize and improve the market”, Naimi told reporters.

Brent crude futures were up 53 cents at US$33.92 a barrel by 1135 GMT, having fallen from an earlier peak of US$35.55, the highest price since February 4. “So whilst it’s a positive step, I don’t think it will have a huge impact on supply/demand balances, simply because we were oversupplied in January anyway”, said Energy Aspects’ analyst Dominic Haywood.

He said he hoped other producers would adopt the proposal, while Venezuela’s Oil Minister Eulogio Del Pino said more talks would take place with Iran and Iraq on Wednesday. It plans to boost output and exports by 1 million barrels a day this year following the lifting of global sanctions last month.

“This is an announcement of a production freeze among countries whose production didn’t even grow recently”, said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt.

Jason Tuvey, Middle East economist at Capital Economics, said Tuesday’s agreement should help support prices.

Many OPEC watchers said the biggest obstacle to an OPEC/non-OPEC deal would be the positions of OPEC members Iran and Iraq.

The mood began to change in January as oil prices fell below US$30 per barrel.

Public finances in Saudi Arabia and other Gulf states are also suffering badly.