Saudi Arabia and Russia have started bilateral consultations on whether they should start cutting oil production again in 2019, Russian news agency TASS reported on Wednesday, citing an OPEC source familiar with the talks.
The idea to start talking about reducing supply again came from Saudi Arabia, according to TASS’s source, who also noted that the issue would be discussed with Russian oil producers as well.
Russia’s Energy Minister Alexander Novak told reporters in Beijing on Wednesday that he would hold talks with Russian oil companies before the meeting of the Joint Ministerial Monitoring Committee (JMMC) of OPEC and non-OPEC in Abu Dhabi this weekend.
“There is no position yet, we are working at it with our companies,” TASS quoted Novak as saying when asked what Russia’s position is ahead of the JMMC meeting on November 11.
Russia will have to look at demand projections for this quarter and for the first quarter next year, and at demand in other countries, Novak said.
According to the Russian energy minister, the oil market is currently ‘well balanced’, despite the U.S. sanctions on Iran, because the U.S. granted temporary waivers to eight countries to continue importing Iranian oil. Related: Big Oil Wins Ballot Initiatives In Colorado, Washington
At its previous meeting last month, the JMMC said that its review of the recent market fundamentals showed “a very comfortable supply level relative to demand,” but noted that OPEC and its Russia-led non-OPEC partners in the deal may have to change course in the current relaxing of the cuts, due to increased inventories in recent weeks and uncertainties about the global economy.
This weekend’s JMMC meeting will see the panel discuss the possibility of reducing production again next year, as some members have expressed concern that global oil inventories are rising, delegates told Bloomberg on Wednesday.
Following the reports that a fresh oil production cut may be on the table of negotiations, oil prices—which had been trending lower this week—were up at 08:16 a.m. on Wednesday, before the EIA inventory report. WTI Crude was up 0.9 percent at $62.77 and Brent Crude was trading up 1.22 percent at $73.01.
By Tsvetana Paraskova for Oilprice.com
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It is enough for Saudi Arabia and Russia to withdraw the 650,000 barrels a day (b/d) they added to the market three weeks ago. That decision was wrong and it was motivated (in the case of Saudi Arabia) by pressure from President Trump to push prices down to save his neck and his republican party in the mid-term elections but the Saudi help did not save his party from losing the House of Representatives. Still, President Trump in his typical Bravado declared victory as he will certainly do when he is forced to end his escalating trade war against China, a war he knows that he can’t win.
However, the mere idea of Saudi Arabia and Russia consulting on possible production cuts next hear is another admission that Sanctions against Iran are doomed to fail and that Iran will not lose a single barrel from its oil exports otherwise why thinking of cutting production again in 2019 when the global oil market has not re-balanced completely yet. I have always maintained that the oil market has still a small pocket of glut capable of taking care of outages in Venezuela and elsewhere.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London