The rumors of a coordinated production cut between OPEC and Russia continue to grow more serious. The latest comes from the Russian energy minister Alexander Novak, who insisted that Russia will hold talks with OPEC in February on a possible agreement to reduce output.
There are very many questions, on checking cuts, from what base to count from. In order to start working through these issues, we need general agreement, it’s too early to talk about that. That’s the subject of the meeting and discussion (in February),” Novak told reporters, according to TASS.A 5% production cut across the board for all participants.
That’s what Saudi Arabia floated last year. When asked if that was still on the table, Novak replied, “That is precisely the subject for debate.” The meeting could tentatively take place in February. It was originally proposed by Venezuela, which has pleaded for emergency measures to stabilize oil prices.
Oil supply growth will be flat this year. OPEC has little room to expand beyond what Iran will be able to return to the market, which is somewhere between 500,000 to 1 mb/d. Other members could see production fall. Non-OPEC production, especially from the U.S., is expected to fall much more significantly in 2016. Other major non-OPEC producers, such as Russia and Brazil, will also see lower output moving forward compared what everyone thought in 2014.
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