Russia cautious on prospects for oil cut deal with OPEC

MOSCOW: Russian Deputy Prime Minister Arkady Dvorkovich on Friday played down expectations that Russia could coordinate with OPEC to arrest the fall in oil prices by reducing production, saying the state would not intervene to balance the market.

Oil prices have jumped in the past 48 hours after Russian energy officials said they had received proposals from OPEC lynchpin Saudi Arabia on managing output, and were ready to talk.

But Dvorkovich, whose portfolio includes overseeing the energy sector, sounded a more measured tone when he spoke at a news briefing in Moscow on Friday.

“We take the position that our oil sector is, to a significant extent, private, and is commercially minded, it is not under the direct control of the state. Our market is governed by the decisions of individual companies, and that is how it will continue,” he said.

“If prices are at a low level for an extended period of time, a correction in investment will become inevitable and that will lead to a certain reduction in output, but that will not be a deliberate act by the state.”

Energy Minister Alexander Novak also took a cautious approach on the outcome of any negotiations between the Organization of the Petroleum Exporting Countries (OPEC) and oil exporters outside the grouping.

“We’re ready to discuss the issue of cutting oil output volumes, but this isn’t a decision,” Novak said in an interview with Bloomberg.

“We’re ready
to consider the possibility. This should be a consensus. If there’s a consensus,
it makes sense, if not,
it’s not.”

Novak was reflecting the challenges of reaching a deal between key OPEC countries on one hand, and on the other hand Russia and Iran, which have strong reasons for keeping oil exports high, at least for now.

It is possible though, according to analysts, that Russia could offer concessions to OPEC on oil in exchange for movement on other, unrelated issues, especially the conflict in Syria.

Saudi Arabia and allied Arab states provide weapons and financial support to armed groups fighting against Syrian President Bashar al Assad, while Moscow backs Assad.

Fuelling speculation the Kremlin may be seeking to use oil as a geo-political bargaining chip, the foreign ministry said the oil market would be among items on the agenda when Russian Foreign Minister Sergei Lavrov visits Oman and the United Arab Emirates early next month.

Ministry spokeswoman Maria Zakharova said the talks in both countries would touch on “the reduction of volatility and ensuring a fair level of prices for hydrocarbons.”

Ordinarily, Russia’s talks with other exporters about the oil market are led by the energy ministry or Igor Sechin, head of state oil giant Rosneft, with the foreign ministry taking only a supporting role.

Dvorkovich’s comments about the state not intervening in the market do not necessarily rule out Russia reducing output in line with OPEC cuts.

Industry insiders say oil firms do not need to turn off the taps on wells. They could simply stop investing in maintaining production levels, presenting the resulting falls in output as part of a natural, commercially-driven process.

Russia said it expected to kick off discussions about oil output at talks between OPEC and non-OPEC countries.

Two OPEC delegates said a date had not been set. “There is no date. Maybe in February, maybe the beginning of March,” said one. The other delegate said such a meeting would be at an expert, rather than ministerial, level.

Bloomberg also reported that Novak said there was no confirmed meeting of OPEC and non-OPEC nations to discuss production cuts.

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