Oil prices have shot up ahead of a meeting between the energy ministers of Saudi Arabia and Russia, the world’s two largest oil exporters, in Qatar.
Reports say Saudi Arabia's Ali al-Naimi and Russia’s Aleksandr Novak are meeting to discuss the glut in global oil production that has caused oil prices to collapse since 2014.
The meeting comes even as Iran, freed this year from most Western economic sanctions, launched its first oil exports to the European Union in over three years on February 15.
Iranian officials say the country has boosted exports by 400,000 barrels a day so far this year, adding to an already saturated global oil market.
Crude-oil prices have plunged more than 70 percent since June 2014, falling below $27 a barrel last week, largely because of surging supplies from the United States, Russia, and members of the Organization of the Petroleum Exporting Countries (OPEC) like Saudi Arabia, Iraq, and Iran.
OPEC officials say a new idea has been discussed in recent days. Rather than trying to cut production -- a goal which appears unattainable right now -- members might agree along with Russia to simply not increase production any further.
Such an output freeze would allow Iran to continue pumping at its current higher rate, while Russia could continue its recent record levels of productions, which were projected to flatten out this year anyway.
Saudi Arabia has said it would need cooperation from other major producers like Iran and Russia before it would consider curtailing production.
Russia has a tarnished record on cutting production, having failed to follow through with cuts it promised to coordinate with OPEC in 2001.
Iran Reluctant To Cut Production
Still, it is Iran that has been most reluctant to consider restraining production, since the lifting of nuclear-related sanctions this year has enabled it to ramp up its depressed output to levels that prevailed before the sanctions.
An OPEC official told The Wall Street Journal that Venezuelan officials believe they can convince Iran to go along, however.
Naimi and Novak will be joined in Qatar’s capital, Doha, by Venezuelan Oil Minister Eulogio Del Pino, the delegates said. Their Nigerian counterpart, Emmanuel Ibe Kachiwku, will join them on February 21.
Nigeria and Venezuela have been strong advocates of a production cut coordinated with other large producers like Russia to try to bring supply back into balance with demand and boost prices.
OPEC officials have said Saudi Arabia will be closely watching Iran’s return to the market before deciding whether a production cut is wise.
The talks come after previous attempts led by Venezuela to agree on a production cut failed earlier this month. Nigeria has called for an emergency OPEC meeting to talk about cutting production ahead of the cartel’s scheduled gathering in June in Vienna.
The fall in oil prices has devastated the economy in Venezuela, Nigeria, Azerbaijan, Iraq, and other oil producers. Russia's economy is also showing strain, as oil-dependent government revenues plummet.
What stance Russia will take in the negotiations is a mystery. Igor Sechin, an ally of Russian President Vladimir Putin and president of the country’s largest oil company, state-run Rosneft, said last week that the market would benefit from a 1 million-barrel-a-day cut in production. But he downplayed the likelihood of a coordinated cut.
Other Russian officials, including Novak, have been more willing to openly discuss working with OPEC.
Russia’s representative to OPEC said on February 15 that his country wasn’t in talks with OPEC on potential cuts to oil output, but was talking with some of the group’s members, mostly through Venezuela.
While it’s not clear what will be accomplished by the Doha meeting, battered oil markets reacted enthusiastically to the news. Oil prices surged by 2 percent in trading on February 15 and gained another 3 percent to 4 percent in early trading on February 16.
"As much as we continue to believe that this is yet another meeting that would yield nothing, the markets remain wary of any sudden agreement that major oil producers could come to," Daniel Ang, investment analyst at Phillip Futures in Singapore, told AFP.
"It does seem like Russia has been invited into the inner circle of OPEC countries, which was vastly different from a year ago."
With reporting by Reuters, The Wall Street Journal, Bloomberg, and AFP