Russia thinks a 6-month freeze is the cure for the global oil market

REUTERS/Sergei Karpukhin

Freezing global crude oil production for six months with an option for an extension would be the most appropriate and efficient way to rebalance the market, Russia’s Energy Minister Alexander Novak said in a TV interview the ministry published on Monday.

Moscow is continuing its consultations with companies operating in Russia, and hopes that everyone will take part in an agreement on freezing output, the minister added.

At the end of last month, OPEC producers agreed to discuss a deal to limit production to a range of between 32.5 million barrels per day and 33 million bpd. Oil prices rallied after that announcement then, but later lost steam amid growing skepticism if OPEC would be able to agree to quotas and more importantly, to stick to its decisions.

In a surprise twist of events at the beginning of last week, Russian President Vladimir Putin said that Russia was ready to join OPEC’s efforts to reduce global oil supply, but stuck to the word “freeze” instead of “cut”.

In his TV interview, Novak reiterated Russia’s commitment to join talks on the freeze, which he says could help markets return to balance quicker. Prices need to be higher for investment to return, the minister noted, but warned that they should not be so high that they attract a quick inflow of capital, especially in shale oil.

In addition, a Russia-Saudi Arabia working group will be meeting in Riyadh in the second half of October to discuss energy cooperation, the Russian minister noted.

So various-format OPEC and non-OPEC meetings will be held before OPEC’s regular meeting in Vienna on November 30, which is expected to discuss the specifics of a potential deal to limit production.

Meanwhile, OPEC’s crude oil output reached a new record of 33.64 million barrels per day in September, according to the International Energy Agency (IEA). Russia saw its oil output last month rise to a new high as well, of 11.11 million barrels per day, up 4 percent on August.

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