Baku, Azerbaijan, Feb 1
By Aygun Badalova - Trend:
Even if a high level deal on oil production cut with OPEC could be done, Russia may face difficulties in delivering it, analysts of the British economic research and consulting company Capital Economics believe.
"Saudi Arabia might be willing to change tack and agree to coordinated output cuts, but it is not obvious that Russia would be a reliable partner. For a start, political relations between Saudi Arabia and Russia are poor, not helped by the latter's support for Iran and recent intervention in Syria," analysts said in a report, obtained by Trend.
Russian Energy Minister Alexander Novak confirmed Russia's readiness to meet with producers to discuss oil production. He said that the topic of discussion at the planned OPEC meeting in February with representatives of other oil-producing countries could be the question of oil production reducing for each producer country at the level of five percent, but a general agreement is needed for it.
Even if a high level deal could be done, it is not clear that Russia could deliver, according to analysts.
"Part of the problem, of course, is that Russia is in recession and has a large number of competing oil firms who are presumably each still keen to sell as much oil as possible at almost any price. This contrasts with the relative wealth of Saudi Arabia and the near-monopoly position of Saudi Aramco," they said.
What's more, Russian companies cannot easily turn the taps off and on at this time of year due to the harsh winter weather, according to the analysts.
"This makes access to remote sites difficult, and means that it is hard to re-start facilities once they are shut down. Nor does Russia have much spare storage capacity, so it would not be possible simply to hold supply back from the market to support prices," they said.
"The upshot is that a sustained recovery in oil prices will have to be built on much stronger foundations than comments from one or two Russian officials," analysts concluded.
In its recent summit on December 4, the OPEC failed to put a new ceiling to its output. The cartel members produced 32.182 million barrels per day in December, including some 693,000 barrels per day, produced by new member, Indonesia.