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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Permalink Reply by bo boboski on February 19, 2016 at 11:15am

You're right on ;Joe. Unless you are in a producing shalerock unit,or gonna be someday soon,the price of oil is good at these prices! It's either"drill-baby-drill,  or pump-baby-pump.

Permalink Reply by jerry lee nichols on February 19, 2016 at 2:38pm

I don't buy it Barry, this free flow of goods and capital shit has ruined this country since Ronald Rayguns time. Its time for a new and more protectionist direction.

Permalink Reply by Joseph-Ohio on February 19, 2016 at 10:46pm

I'm on your bus jerry lee nichols.

Permalink Reply by Barry D on February 20, 2016 at 1:10am

jerry,

I believe in "some" regulation.

Where in the world or at one period of time in history has another system produced as much prosperity.

These socialist/communists loonies (Hilary and Bernie) believe that government control of every aspect of our lives will produce a Utopian society.

Uh - wake up call folks. This has all been tried...and failed. Look at Cuba, Venezuela, failures. Most Central American and South American nations have experimented with socialism or communism. Any of them succeed? No

How about Europe? Most of those countries have been socialist for over 50 years and their economies are crumbling. Heck, we have to pay to protect them militarily because they are so messed up.

Let's see... oh yeah, the Soviet Union was a big success under communism right? NOT!

No, not once, not ever has any system ever produced a better life for people as our system.

BTW - Ronald Regan - because of his economic reforms there were 28 years of economic growth in this country. Even slick Willy kept many of the Regan policies in place. Why? They work.

No, instead of impeding the oil and gas industry the government should be working side by side with it. Not only to increase production here in the U.S.; but also to ensure environmental and worker safety. It would be better for us all.

Permalink Reply by jerry lee nichols on February 20, 2016 at 4:29am

How so? Because of the break up it is difficult to compare Russia/Belarus with the old USSR but they have done much better the than the US since 1980. Most of these so called economic gains are on paper only or things like farm exports that profitwise benefit a very few plantation owners/field owners and their Mexicans. In the micro-economic sense this period of time has seen the destruction of the industrial might of the US.

Permalink Reply by Barry D on February 20, 2016 at 4:51am

jerry,

No it isn't just on paper.

Yes, industrial production is down, and whose policies are responsible for the demise of the industrial might of this country. None other than socialists such Bill Clinton. Remember NAFTA, the repeal of Glass/ Steagall?

Of course all of the people who work in agriculture do it for free right? They don't earn an income do they? An income that pays local taxes, supports local businesses. An income that supports communities all across this nation. All of that is fantasy to you too isn't it? Just like the economic growth created by Reagan policies.

Wow, talk about re-writing history.

And I suppose you support Bernie or Hillary

If either one gets in you can kiss the oil and gas industry goodbye.

You can also say sayonara to inexpensive gasoline, and heat for your home.

Permalink Reply by Barry D on February 20, 2016 at 4:55am

jerry,

A further thought: If things are so great in Russia and Belarus, why aren't people from the U.S. moving there? Why do citizens of those places continue to emigrate to the U.S.? If it's so great there you would think they would stay put.

Permalink Reply by jerry lee nichols on February 20, 2016 at 5:44am

Well as I recall the Republicans pushed NAFTA big time but could not get it through Congress so they hired a Boll Wevil in Slick Willie to get it enacted. The other thing is Glass Steagel pales in comparison to the amount of money Slick redirected from dollars support funds to bail out the big banks during the Testabono Crisis or a bunch of the crooks would have collapsed. Why not move to Russia? Well since I am a disabled vet from defending this country I guess I'll stay, besides its f%$#@&^ cold in Russia.

Permalink Reply by Barry D on February 20, 2016 at 2:49pm

jerry,

Thank you for your service.

God Bless You for protecting our country and the values for which it stands.

Permalink Reply by Joseph-Ohio on February 21, 2016 at 1:21am

Hello all.

Header of this post says we've just been kicked in the sack by whom Hilary Clinton says is our 'important ally' (Saudi Arabia) by cutting a big deal with Russia.

These two are the two largest oil producers in the world / on the face of the planet and of course form the core of OPEC.

Tell us anything at all do ya' think ?

Tells me not to vote for Hilary / any Democrat / Socialist for one thing.

Time to look for a coalition to stand up to these birds - actually WAY, WAY past time.

Gets me nauseous just thinking about it.

JMHOs

Permalink Reply by Barry D on February 21, 2016 at 4:21am

Joseph,

What it tells us is that the Obama foreign policy is a joke.

His attitude of stepping back has left a vacuum. Russia has taken the opportunity to fill that vacuum. The proposed deal with Saudi Arabia,etal, is an example.

We need a pro growth President, Hillary and Bernie are not that.

We already have a quasi coalition with Mexico and Canada.

Permalink Reply by jerry lee nichols on February 21, 2016 at 6:07am

Thanks Barry, but that was 4 plus decades ago and as I recall when I got someone yelled baby burner,. At any rate it has nothing to do with economics and Obama is doing the right thing by ignoring these people and not interfering. One thing that workers in this country have caught on to are that the terms " pro growth" and "world class" are euphemisms for lets screw our workers and nation.

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