Russia and 3 OPEC Members Agree to Freeze Oil Output (NYT)

In a sign of tentative cooperation among major oil producers, Qatar, Russia, Saudi Arabia and Venezuela announced a plan on Tuesday to freeze output at current levels, a move intended to help bolster energy prices.

The plan, albeit hardly concrete, reflects the troubled state of the oil industry.

With prices having recently slipped to new lows, major oil producers, particularly in the Organization of the Petroleum Exporting Countries, are trying to calm the markets with talk of a deal. But the proposal gives countries a potential out, a big reason oil prices gave up their initial gains on Tuesday.

While speculation focused for months on production cuts, the talk now centers on holding production steady. Even that would be helpful in a market where countries have been steadily ramping up production to record levels.

It is also symbolic that Saudi Arabia and Russia are now presenting a united front on oil. The two countries are geopolitical rivals, backing opposite sides in the Syrian civil war.
While major oil-producing countries have been floating ideas to the markets for months, divisions are heating up, as oil prices flirt with $30 a barrel.

Venezuela has been especially vocal about managing production. The country’s economy, which is critically linked to the prices of oil, is in disarray and its leadership has little financial backup.

Now, it appears to be getting support from Saudi Arabia and Russia. While such big players are feeling the pain, they are in better shape, making it easier to weather the price weakness.

“It is a positive step in the right direction in a transition period,” said a Gulf oil official who spoke on the condition of anonymity because of the delicate nature of the talks. “The main driver is prices going below $30 a barrel, which was very disturbing.”

He added that it was important that four major oil powers, Saudi Arabia, Russia, Venezuela and Qatar, were involved in the discussions. There is a “clear road map” of what countries to approach next, he said, an effort that could lead to a more formal agreement on production.

But the producers are not committing to a deal, highlighting the difficulty of the process. The four countries said they would freeze their output at January levels only if other major exporters did the same — and that is hardly an easy sell.

Iran has staked out a policy of increasing oil exports now that sanctions have been lifted as part of its nuclear deal, and Iraq has a longstanding policy of seeking to ramp up production regardless of OPEC price-stabilizing policies. And Russia, which is not a member of OPEC, has historically resisted any binding coordination with the OPEC cartel to bolster global oil prices.

“The four countries — Russia, Saudi Arabia, Qatar and Venezuela — are ready to freeze oil production at January levels if other producers join this initiative,” the Russian Ministry of Energy said in a statement issued after the talks.

The markets were lukewarm on the plan. Oil prices initially surged above $35.50 a barrel on discussion of a deal. But details prompted a pullback in prices, which dipped below $34.

“The market does not need a freeze. It needs a reduction,” said Michael Lynch, president of Strategic Energy and Economic Research in Massachusetts. “They are not offering anything like that.”

He added that the plan announced on Tuesday was in the early stages. “People are talking and admitting to concerns about price levels,” he said.

Read more: http://www.nytimes.com/2016/02/17/business/energy-environment/opec-...

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Replies to This Discussion

Permalink Reply by bo boboski on February 16, 2016 at 10:38am

I can see the price of gasoline at the pump going up very soon!

Permalink Reply by jerry lee nichols on February 17, 2016 at 5:11am

yes, the Refineries are getting ready for maint outtages and changeover to more expensive summer blends with more ethanol and shit, so I agree.

Permalink Reply by Joseph-Ohio on February 16, 2016 at 12:22pm
Too bad Venezuela is playing ball with the wrong hemisphere.

Someone should tell them their country isn't in Europe.

Maybe they subscribe to this board and they'll catch the drift.
Permalink Reply by Joseph-Ohio on February 16, 2016 at 12:33pm
I'm no authority, but I've got a brain that formulates opinions based on what actions others take - and I think it could make sense and perhaps provide additional revenue for our Federal Government to invoke a stiff Tariff on OPEC production as well as an embargo.

I think BOTH things would only be right myself - and the best way to see who our friends are.

Are we in a Trade War or not ? ?

Why subsidize our opponents and not ourselves and Vetted Allies ? ?

It only makes intuitive sense to me.

Thinking our leadership just says we're in a Trade War but doesn't act like it if you ask me.

That makes no sense at all to me and it never has no matter what party leads.

Too many jobs lost already.

Why not see what happens when we kick them in their shins for a change.

JMHOs
Permalink Reply by Joseph-Ohio on February 17, 2016 at 12:27am

Embargo = No OPEC production trade / purchases by allied countries of the Americas without OPEC paying the Tariff.

To be sure then the Americas production sell price would be less than the OPEC production sell price with subsidy to the Americas producers by the allied governments from the Tariff.

Only way to remove the embargo would be for OPEC to pay the Tariff.

Call it 'Protectionist' or 'Isolationist' if you like because that's what it is - but I think we need it.

You know, like in a real 'Trade War'.


JMHOs

Permalink Reply by jerry lee nichols on February 17, 2016 at 5:14am

We have no leadership, only corporate owned hacks that give away American jobs and lower taxes for the Idle rich.

Permalink Reply by David Allen Lilly on February 18, 2016 at 1:21am

Correct about the lack of leadership part. I support protectionist policy but am aware of the law of unintended consequences.
I know that many are traitors to this country, trading patriotism for profit.
Just think of the cripplingly massive amounts of wealth sent to the Middle East over the last 15 years just for oil alone.
Then, quantify the lost revenues from China's MFN trade status and NAFTA.
Our country has cut itself off at the knees.

Permalink Reply by Joseph-Ohio on February 18, 2016 at 1:46am
On your bus.

Personally, I'm ready to risk running afoul of 'the law of unintended consequences' but, only after most carefully planning our path forward and constructing said path eliminating ALL pitfalls.

Our Tariffs and Embargos are instruments of our own construct and are meant for our benefit - so, we should create them such and to avoid and eliminate ALL damage to ourselves.

You know - with 'Boiler Plate / Armor' - like a Major E & P Company would write their standard leasehold agreement !

Catch my drift ?
Permalink Reply by Joseph-Ohio on February 19, 2016 at 3:43am

If we and our vetted allies forged an Oil Producing American Countries Trade Agreement here is some 'Tariff  Logic' in a 'Trade War' that I think works to what I see as a 'win-win' for our Industry / Federal Government  / Consumer Population :

1st OPEC / any Non-Allied Trading Partner (S.A., Iran, etc.) would have to want to maintain a 'Market Share' with ourselves / our Allied Trading Partners.  If they didn't want that we don't bend over backwards trying to provide it and take a beating in the process.

2nd we and our Allied Trading Partners need to pay attention to the margins and maintain profitability among ourselves - this means 'Maintenance'.  

Say it works out that the Non-Allied do want to do business and we and our Allied Trading Partners are willing to accept the 'Maintenance' aspects - here's how it could work out :

OPEC / S.A. / Iran etc., et al all sell to our side at $30.00 / per barrel (to our Gas / Oil Industry and must by Tariff pay the Feds another $20.00 per barrel.

The Feds pay the 'Allied Industrial Buyers' involved in such a transaction $10.00 per Barrel and keep the other $10.00 per Barrel for themselves / maintenance processes.  That means that our 'Allied Industrial Buyers' only paid $20.00 per Barrel.  Our  'Allied Industrial Buyers' then turn around and sell the production purchased from the Non-Allied Trading Partner for $25.00 per Barrel to their Domestic Customers which means they make $35.00 per barrel ($10.00 per Barrel from the Feds + $25.00 per Barrel from their Domestic Customers).

If the Non-Allied Trading Partners don't like it they can make Pepsi-Cola out of their oil and drink it all up for all I would care.

It takes the Non-Allied wanting a 'Market Share' of our Allied Market and ourselves and Allies a degree of Maintenance (watching and maintaining a margin of profitability for themselves).

Maybe the whole thing works out the same as an Embargo - but, I would do that too - the only way we trade would be in such a manner.

Permalink Reply by Joseph-Ohio on February 19, 2016 at 3:58am

I've also many times read on these pages and elsewhere that our refineries here in the USA aren't designed to refine our own Light Oil Production.

I say then that we need to build more of the right kind of refineries here at home !

That's the only way to see it.

What good is having all this oil if it can't be refined and used ?

Here's where the Tariff $ + Federal Subsidy could help get the right kind of refineries built here at home.

That's called 'Domestic Commitment'.

Let's get it done.

Building refineries mean jobs.

Jobs mean prosperity.

What are our leaders waiting for ?

Permalink Reply by Joe on February 19, 2016 at 4:04am

Hear! Hear! Your on a roll Joseph! Keep up the good work.

Permalink Reply by Joseph-Ohio on February 19, 2016 at 4:20am

u 2 Joe !

Thanks for the encouragement.

Good luck to all of us.

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