The crude oil price increased 2.26% to $33.03 per barrel on Thursday as the Russian government continued talks with Saudi Arabia at the OPEC oil cartel about production cutback. The concerns over the global economy have prompted big movement in the oil markets over the last month. For example, the benchmark New York rate has down to near 13-year lows.
A turnaround in crude oil price would be welcomed by oil-producing countries where the price collapse has caused budget reduction and political turmoil with some nations forced to devalue their currencies.
On Thursday, a Russian state news agency quoted Russian Energy Minister Alexander Novak said oil-producing countries could meet in February to discuss 5%production cutback.
"Indeed, these parameters were proposed, to cut production by each country by up to 5 percent," Novak said. "This is a subject for discussions, it's too early to talk about."
Saudi Arabian officials did not immediately respond on the proposal, but a senior Gulf OPEC delegate said: "Gulf OPEC countries and Saudi Arabia are willing to cooperate for any action to stabilize the international oil market."
according to the International Energy Agency, Russia produced 11.1 million barrels of oil per day in 2015, and Saudi Arabia produced 10.1 million barrels of oil per day. If each country reduces 5% production that would cuts global oil output over one million barrels per day, which is approximately equal to the current oversupply in the market.
However, Russian government have long said they wouldn’t reduce oil production because it would be difficult to restart wells in cold oil-producing regions. In addition, Russian oil output is controlled by multiple companies, not only single national oil company, as the same in Saudi Arabia.
Another concern is that Iran is expected to increase its production in next month, because of the international sanctions are lifted. OPEC Secretary General Abdalla Salem el-Badri said at the group’s most recent meeting in December that officials would wait to evaluate Iran’s return to the market before meeting again.