KRASNOYARSK, Russia, Feb 19, (RTRS): The global oil market is over-supplied by around 1.8 million barrels per day (bpd), but that glut could be halved if a deal to freeze oil production at last month’s levels takes effect, a top Russian energy official said on Friday.
Leading OPEC member Saudi Arabia, non-OPEC member Russia, Qatar and Venezuela this week agreed to freeze output at January levels if others joined in. Iran welcomed the move but stopped short of pledging to act itself and it is unclear whether the freeze will actually happen.
“If the agreement is properly fulfilled and it definitively enters into force then around half of that excess supply may be removed from the market,” Alexey Texler, Russia’s first deputy energy minister, told reporters in the Siberian city of Krasnoyarsk.
“Even without Iran there will be an effect from the agreement. But Iran … might also be interested in such a deal,” he said, noting Tehran had a choice of increasing output at a time of falling prices, or joining the production freeze and potentially getting a higher price for current volumes.
“We are optimistic,” he added.
Russia and OPEC were both pumping oil at near record volumes last month, with Russia reaching another post-Soviet high of 10.88 million bpd.
“We are talking about freezing January production levels. It would be higher than the annual average for 2015 by around 1.5 percent,” Texler said. Oil production in Russia last year averaged 10.72 million bpd.
The first mooted global oil pact in 15 years will depend on other producers, but it remains unclear which other countries need to sign up for the deal to be implemented.
Asked if Russia will talk to the United States, Brazil, Mexico and Norway, Texler said: “Any country may join. But we are realists and, in general, we understand which countries it will be. Many of those you named, obviously, will not do that.”
He added that some producers, still, were uniting round the idea. Texler did not name them.
“We consider such an agreement useful and necessary. It will allow us to forecast the output volumes of key market players, and such an agreement will allow to continue the market process of influencing expensive projects.”
The Russian oil industry would “move forward” at a price of $35-40 per barrel this year, Texler said. Earlier on Friday, he said that investment in the Russian energy sector was likely to be lower this year than in 2015.
Brent crude is currently trading around $33.40 a barrel.