Russian oil companies back the idea to freeze output at near-record levels reached in January, but did not support any proposals to cut oil production to lift global prices, Energy Minister Alexander Novak said.
Russian President Vladimir Putin met the heads of the country’s top producers, including Rosneft Chief Executive Igor Sechin, Lukoil CEO and co-owner Vagit Alekperov and others, to hear their views on last month’s proposed output freeze.
Novak, who was negotiating the first potential global oil pact in 15 years in Doha, said Putin and the oil firms, which pumped at a new post-Soviet high in January at 10.88 million barrels per day (bpd), discussed the deal at the Kremlin.
“Companies have confirmed that they support this initiative and in general, this should give quite a positive signal to the market,” Novak told reporters after the meeting.
“Our companies do not propose ‘radical’ measures. As you know, in our climate this is hard (to do) – if you are meaning proposals to cut production. We have discussed this option, too… but all supported the idea we discussed in Doha.”
OPEC sources and delegates told Reuters on Tuesday that OPEC was very unlikely to cut output at its next meeting in June, as it will be too early to say how fast Iranian output is rising.
The sources said OPEC countries such as Saudi Arabia also want to test Russia’s commitment to freezing output before taking any further steps to stabilise prices.
In opening remarks to what was the first official meeting with oil firms since the Doha agreement, Putin said: “our task is to maintain Russian oil sector’s stability, ensure is development, implementation of long-term projects.”
On Tuesday, Putin said he wanted to hear oil firms’ views on the proposal in person, adding Novak had informed him that all firms agreed with a freeze. He did not comment afterwards. Rosneft, Lukoil, Bashneft and Gazprom Neft declined to comment.
If Russia keeps average oil output this year at January levels, this will represent a 1.5 percent increase over 2015, also a post-Soviet high.
Novak said the global oil market was currently oversupplied by around 1.5 million bpd, but if the freeze was implemented then the surplus would be curbed and the period of low oil prices would be reduced by one year.
He did not say when the market may rebalance but said prices were unlikely to return to levels above $100 per barrel, calling prices in the range of $50 to $60 as optimal.
Benchmark Brent crude futures traded around $37 per barrel on Tuesday. Novak added that 73 percent of oil exporting nations were ready to join the deal but a lot depended on other countries’ position towards Iran.
“It is true that Iran has a special situation as Iran is at its lowest levels of production. So in my opinion, it (Tehran) may be approached individually with a separate decision,” said Novak, who will visit Iran later this month.
Non-OPEC Oman and some OPEC sources have floated the idea of exempting Iran from any output freeze, an approach taken towards Iraq in the past when it was subject to international sanctions. But so far Tehran has not been offered any special terms, according to OPEC sources.
Novak said Russia planned to negotiate with other non-OPEC and OPEC nations for a potential meeting in March to try to agree a final decision on a freeze deal.