Short-term oil output cap can reduce market volatility: Russia

Reuters

A short-term cap in oil output would reduce market volatility, Russian
Energy Minister Alexander Novak said on Monday at a meeting with OPEC Secretary-General Mohammed Barkindo, as both are looking at ways to stabilise prices.
Russia is the world’s largest oil producer but not a member of the Organization of the Petroleum Exporting Countries and its budget has been hit by low oil prices, the same as for many OPEC nations. Novak, in Vienna after visiting Saudi Arabia over the weekend for talks with Saudi Energy Minister Khalid al-Falih, said sharp falls in the price of crude threatened to trigger an oil deficit and unpredictable volatility in prices.
“That’s why … (an oil output) freeze or even a cut for a certain period of time is a right decision for global energy … Being a short-term measure, an oil output cap may help to lower volatility in the market and make it more stable,” Novak said.
Last month in Algiers, OPEC agreed modest output cuts that are due to be set in stone in coming weeks. The goal is to trim production to a range of 32.50-33.0 million barrels per day (bpd). OPEC’s Barkindo said before Monday’s meeting, which also included Qatar Energy Minister Mohammed al-Sada, that Russia and OPEC were “committed to stable and predictable markets”.
“While there are signs that the rebalancing of the fundamentals is under way with overall non-OPEC supply contracting this year and demand … at healthy levels, the large stock overhang continues to be a major concern,” Barkindo said.
Neither Novak nor Barkindo said at which levels Russia could cap its production, which reached a record-high 11.1 million bpd in September. Novak has repeatedly said Russia would prefer to freeze output rather than cut but would consider specific steps after OPEC members reach agreement.

IRAQ BALKS AT JOINING CUTS
Iraq threw an obstacle in OPEC’s path toward a final deal to stabilize
oil markets when it balked at joining efforts to trim output to prop up crude prices.
The group’s second-largest producer should be exempted from cutting production because it’s embroiled in a war with militants, Oil Minister Jabber Al-Luaibi said on Sunday at a news conference in Baghdad. Iraq currently produces more than the 4.7 million barrels a day it pumped in September, and output could rise still higher as the government urges international companies to boost production at its fields, he said. The minister disputed Organization of Petroleum Exporting Countries figures that peg Iraqi output at less than 4.2 million barrels daily.
“We are with OPEC policy and OPEC unity,” Al-Luaibi said. “But this should not be at our expense.” A meeting in Algeria last month of the group’s 14 members stretched to seven hours as Iraq argued over the level of production that should be used as a baseline for setting quotas.
OPEC is trying to woo other producers to join in the group’s first output cuts in eight years, a policy shift that members agreed to in Algiers. Crude plunged to a 12-year low in January, hammering the budgets of producers from Venezuela to Saudi Arabia. The price slide led OPEC to abandon its two-year-old Saudi-led policy of allowing members to pump as much as they could in an effort to protect market share.

‘INTENSE CONSULTATIONS’
Saudi Arabia’s Energy Minister Khalid Al-Falih echoed comments by Novak that oil markets are improving. Even so, producers must take further action to speed the recovery, Al-Falih said in the Saudi capital. “Oil markets started moving into balance recently, but we in OPEC, along with producers from outside the group, started intense consultations to take the right action to quicken the re-balancing and market recovery,” he said Sunday in a speech.
Iraq became the fourth OPEC member — after Iran, Nigeria and Libya — to seek an exemption from output limits. The group aims to decide on individual levels when it meets on Nov. 30 in Vienna. Iraq asked OPEC during the meetings in Algeria for an exemption from its participation in any cuts, Al-Luaibi said in Baghdad.