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 Joseph-Ohio on February 21, 2016 at 6:31am
jln,

Forging a Trade Agreement between a coalition of allied countries of the Americas, invoking a stiff Tariff and an embargo against OPEC (of course including Saudi Arabia and Russia) is provoking but is not the same thing as a shooting war.

They were wrong to call us 'baby burners' - we were just a couple of those who didn't dodge the 'Draft' and / or skip off to Canada but rather answered and served.

They should have recognized your sacrifice and instead call guys like you 'wounded and disabled veterans' accompanied by a 'thank you'.

They can call me an honorably discharged veteran of that era.

My 2 cents.
Permalink Reply by Joseph-Ohio on February 21, 2016 at 10:31am
Now there's a bus we're both on Barry D .
Permalink Reply by Barry D on February 21, 2016 at 10:59am

Joseph,

Yeah, but who's driving?

Permalink Reply by Joseph-Ohio on February 21, 2016 at 12:28pm

Good question.

Too many Republican candidates to even guess right now.

Primary Votes were split among a field of six until now. 

Permalink Reply by Barry D on February 21, 2016 at 3:03pm

Joseph,

Anyone of them would be better than HilBern/Bernary

Permalink Reply by jerry lee nichols on February 21, 2016 at 4:50pm

Go Bernie go

Permalink Reply by Joseph-Ohio on February 22, 2016 at 12:07am

From what I gather the Dems are all anti-fossil fuel and pro-solar and wind to the point of putting everyone out of work and broke paying for intermittent energy sources.

Also from what I gather the Reps are pro fossil fuel development but to the point of taking it from the landowners / lessors without paying for it.

So if they (the Reps) can somehow during this pre-election interim prove to me they'll honor lessor / landowner rights and pay fairly for production gleaned from the landowners / lessors without having to be forced to do so in long stretched out court cases / class actions ending in some compromised settlement they'll have earned our vote.

What are the chances of us not ending up with a candidate that meets our criteria I wonder ? ?

Permalink Reply by Joseph-Ohio on February 22, 2016 at 2:25am

It didn't start out this way, but even considering as much of a 'loose cannon' / as crude and rude as he sounds / appears to be - right now at this point in time - I'm thinking Trump + whoever his running mate might end being would be the team I would vote for.

Permalink Reply by Barry D on February 22, 2016 at 3:55am

Joseph,

Certainly can't vote for Hil or Bern

Permalink Reply by Joseph-Ohio on February 22, 2016 at 4:30am

Trump has our attention right now because he's looking to me like an 'Outsider / Maverick' Republican - not a dyed in the wool 'Insider / Mainstream' Republican with whom I've a few issues with these days - especially in way of the manner they are reported by many and seem to me to be mis-treating / abusing landowners / lessors in the Oil and Gas arena.

As I alluded to above a big issue with me is the O & G Companies seem to me to own the empowered 'Insider / Mainstream' Republicans to the point of permitting serious abuses of landowners / lessors to occur.

JMHOs / read of the situation confronting us.

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