With barely a week passing by since top crude oil producers discussed the possibility of freezing output to prop up crude oil prices, Saudi Arabia has already ruled out a production cut. Saudi Arabia’s oil minister Ali al-Naimi stated that the co-ordinated production cuts would not fructify as many producing nations were not willing to do so.
It is also known that Iran has already ruled out freezing output. Non-OPEC member Russia has so far agreed to reducing its supply.
Iran’s oil minister Bijan Zagahneh was quoted as describing the move as a “joke”. His comments came as nations had asked Iran to restrict output to 1m barrels a day but increased theirs to about 10m barrels for export.
This sort of a disagreement continues to keep WTI Crude at $31.48 (NYMEX) and Brent Crude at $32.95 a barrel.
According to Baker Hughes Inc., the number of operational oil rigs in the United States declined to lows last observed in December 2009, a clear sign of the effect of plunging crude oil prices.
For the week ending 19 February 2016, operators shut 26 rigs, bringing the total count to 413. Total number of operational rigs during the same period in the U.S. was 514, comprising of 413 oil rigs and 101 gas exploration rigs.
There was some optimism in the market based on the meeting of OPEC members Saudi Arabia, Qatar and Venezuela and non-OPEC member Russia that planned to curtail production to January 2016 production levels. The supply cut would help prop-up crude oil prices to around $50 by June 2016.
Market analysts forecast the rig count to decline in the coming months and then rise in line with rising crude oil prices.
U.S. shale gas producers have hedged 2017 crude oil prices in the futures market at around $45 a barrel, anticipating a price recovery in prices.
Source: Reuters, Marinelink
Major oil producers led by Russia and Saudi Arabia planned on concluding their preliminary talks on freezing crude oil output by 1 March 2016, states Russia’s energy minister Alexander Novak. A meeting with major oil producers concluded in Doha, Qatar, this week.
A conclusive agreement with all oil producing nations could see output falling by 1.3m barrels per day, in line with average daily output of January 2016.
Saudi Arabia, Russia, Qatar and Venezuela have jointly agreed to freeze output to levels observed in Janauary 2016 if other nations agree to do so.
Iran welcomed the move but has not yet formally committed itself to reducing its output. Its Deputy Oil Minister Rokneddin Javadi stated on Saturday that Iran would aim to increase its output to 700,000 barrels per day in the coming months.
Oil output excluding Iran is expected to decline provided other nations resort to reduced production, according to Alexey Texler, Russia’s Deputy Energy Minister.