Representatives from the Organization of the Petroleum Exporting Countries (OPEC) met with Russian Energy Minister Alexander Novak at the Gulf Cooperation Council (GCC) conference in Riyadh on Sunday to discuss a plan to stabilize the oil market.
Russia is the world’s largest oil producer but not a member of OPEC and its budget has been hit by low oil prices, the same as for many OPEC nations. Sharp falls in the price of crude threaten to trigger an oil deficit and unpredictable volatility in prices. Novak said a short-term cap is the “right decision” for global oil prices.
“We have in detail discussed the current situation (on oil market) and different mechanisms and options of joint actions. Being a short-term measure, an oil output cap may help to lower volatility in the market and make it more stable,” Novak said. “We see the need to balance the market in the coming months to encourage the return of investments and the reduction of volatility.”
Saudi Oil Minister Khalid al-Falih mentioned the need to restore balance to the market as well, where a surge in production globally has led to low prices, although he believes the current down cycle is nearing an end.
“Market fundamentals, in terms of supply and demand, have begun to improve,” Falih said, adding “We are optimistic that oil prices will continue to improve in the future.”
After the meeting in the Saudi capital, Novak said that the parties had discussed specific production limits for Russia and other nations that may join the agreement.
Novak declined to say at which levels Russia would be ready to cap its output, adding that lower-tier officials from OPEC and non-OPEC countries, including Russia, will be working on terms of a possible deal on Oct. 28-29 in Vienna.