MOSCOW, April 6, (RTRS): Russia believes an oil price at $45-$50 per barrel is acceptable to allow the global oil market to balance, as it prepares to meet leading oil producers in Doha later this month, sources familiar with Russian plans said on Wednesday.
Leading oil producers plan to meet in Doha on April 17 to cement a preliminary deal reached between Russia, Venezuela, Qatar and Saudi Arabia in February to freeze oil output at levels reached in January, to curb a surplus on the oil market.
“Now there is discussion of how long production will be frozen and ways to monitor the agreement,” one of the sources said.
“The level of $45-50 (per barrel) is acceptable from the point of view of market balance: if prices go higher shale oil production could start to recover.”
A Russian Energy Ministry spokeswoman confirmed that the information provided by the sources was correct.
Oil producers such as Russia and Venezuela are highly dependent on energy revenues, with their state budgets at risk after global oil prices fell to under $40 per barrel from over $115 in June 2014.
The Doha meeting is expected to bring together major oil producers, including the ex-Soviet nations Kazakhstan and Azerbaijan, which along with Russia have seen their currencies falling sharply on weak oil.
The key question concerns Iran, which saw its oil output curtailed for years by sanctions that have been lifted this year, and wants to bring its output to pre-sanctions levels before sticking to any agreement. Tehran plans to attend the Doha meeting, Russian Energy Minister Alexander Novak said this week.
The sources who discussed Moscow’s position said they believed Iran would struggle to quickly reach levels it has announced. They said Iranian growth is now coming mostly from selling oil from storage and putting easy-to-launch fields on stream.
“A freeze without Iran is being discussed. At the moment we don’t see tough conditions (from others) for Iran to join,” one of the sources said.
The sources added that 17 countries in total could take part in the Doha meeting. They said Russia was considering a number of options to deepen its cooperation with OPEC, but they don’t include joining the organisation.
The Russian sources said that the deal to freeze oil output is expected to speed up rebalancing of oil supply and demand by around half a year.
Russia was pumping at a 30-year high last month of 10.91 million barrels per day (bpd), even higher than its previous record in January. The sources said the agreement in Doha is set to cover production, not exports.
They said Russia would not put new projects on hold as part of the freeze deal, and may use other methods to regulate its production, including technical ones. They did not elaborate.
Last month, industry sources told Reuters that Rosneft, the world’s top listed oil company by output, was floating the idea of a domestic production cut to balance the global market and as the firm faces a natural decline this year.
“A cut in production was not discussed as it is hard to implement and may lead to a sharp jump in prices, causing a new wave of output activation at more costly fields,” one of the sources said.