DOHA (AFP, BLOOMBERG) - Energy giants Saudi Arabia and Russia agreed on Tuesday (Feb 16) to freeze oil output at January levels during a meeting in Doha, the Qatari oil minister said.
The Saudi and Russian oil ministers, along with their Venezuelan and Qatari counterparts, "agreed to freeze the production at (the) January level provided that other major producers follow suit", said Qatar's Energy Minister Mohammed bin Saleh al-Sada, who is acting president of the Opec oil cartel.
Qatar and Venezuela also agreed to participate, Mr Al-Naimi said. Oil pared gains in London, after rising before the meeting amid speculation the countries would discuss production cuts.
"This is an announcement of a production freeze among countries whose production didn't even grow recently," said Mr Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. "If Iran and Iraq are not a part of the agreement, it's not worth much - and even then there is still a question of compliance."
More than a year since the Organisation of Petroleum Exporting Countries decided not to cut production to boost prices, oil remains about 70 per cent below its 2014 peak. Supply still exceeds demand and record global oil stockpiles continue to swell, potentially pushing prices below US$20 a barrel before the rout is over, Goldman Sachs Group said last week.
Iran, Opec's fifth-largest producer, ruled out any curbs on its oil production when the group met in December. It plans to boost output and exports by 1 million barrels a day this year following the lifting of international sanctions last month. This week the nation loaded its first Europe-bound crude cargo in four years.
Iraq continues to boost production as it recovers from years of conflict and under investment. The nation's output reached a record 4.35 million barrels a day in January and more increases could follow, according to the International Energy Agency.
Brent crude was 2 per cent higher at US$34.06 a barrel at 10.01am in London, having earlier climbed as much as 6.5 per cent.
"A freeze would not create an immediate U-turn, but it creates a better foundation for the price recovery in the second half," Mr Olivier Jakob, managing director of consultant Petromatrix GmBh, said in a note to clients before the meeting concluded.
The freeze deal comes after months of competition for market share between Russia and Saudi Arabia. Riyadh has taken the rare step of selling crude into Moscow's backyard of eastern European, while Russia overtook Saudi Arabia in oil exports into China. The two nations are also backing opposite sides in the Syrian civil war.
According the IEA, Saudi Arabia produced 10.2 million barrels a day in January, below the most recent peak of 10.5 million barrels a day set in June 2015. Russia produced nearly 10.9 million barrels a day in the same month, a post-Soviet record, according to official data. Venezuela pumped 2.4 million barrels a day and Qatar produced 680,000, according to the IEA.
Qatar will lead monitoring of the output freeze agreement, the nation's Energy Minister Mohammad bin Saleh al-Sada said at a press briefing. Low oil prices haven't been positive for the world, he said.