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Major oil producers seek stabilization in oil markets

  • 16/08/2016 (03:25)
Major oil producers including Saudi Arabia and Russia have recently reported their willingness to help rebalance oil markets after several OPEC members including Venezuela, Ecuador and Kuwait requested to renegotiate an output freeze in late September when oil producers meet for the International Energy Forum in Algeria.

In April, OPEC and non-OPEC producers like Russia could not reach an agreement on an output freeze. Iran was reluctant to limit its crude oil production as the country was aiming to increase production to pre-sanctions levels in order to regain market share while Saudi Arabia had said that they would not sign a deal without participation of all OPEC members, including Iran.

According to OPEC members requesting a rehash of freeze talks, Iran has regained most of its market share that it lost during sanctions and it would increase even further by September.

Regarding the new round of freeze talks, Russia’s Energy Minister Alexander Novak said that they are negotiating with Saudi Arabia and they are open to discuss a possible freeze in output with other members as well if needed. Novak reported that oil markets can achieve complete stability only in 2017.
Before Novak’s comments, Saudi Arabia’s Energy Minister Khalid al-Falih said that they are ready to take the necessary steps to rebalance oil markets in cooperation with other oil producers.

Following the major oil producers’ supportive comments, crude oil markets have adopted a firm trend with NYMEX crude oil prices hitting above the $45/barrel threshold in intraday trading. Brent crude oil futures have also been boosted by the positive sentiment nearing $48/barrel in intraday trading.

And now the market players are questioning whether oil producers can achieve a deal or not?

Saudi Arabia’s record high oil production in July and the kingdom’s previously reported reluctance to limit its oil production in order to protect its market share against its rivals weakens the expectations regarding a possible freeze in output deal. In addition, Oman’s Minister of Oil and Gas Mohammad bin Hamad al Rumhy stated that Oman will not attend the meeting in Algeria next month due to the group’s inability to resolve the issue of low oil prices.

However, lower crude prices have resulted in significant budget deficits and cuts in oil and gas investments in the Middle Eastern countries and this may push them to help stabilize oil markets.
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