Saudi Arabia’s Energy Minister Khalid al-Falih has said that the price of crude oil might hit $60 per barrel this year, following the decision of the Organisation of Petroleum Exporting Countries (OPEC) to cut global production.
This is coming as the Russian President, Vladimir Putin, monday gave his support to international efforts to reduce oil supply and boost prices in the clearest sign yet that Russia might participate in moves to cut or freeze output.
Falih said he was optimistic major oil producers could agree to cut production by November and that it wasn’t “unthinkable” that crude prices could rise another 20 per cent this year to $60 a barrel.
The Wall Street Journal reported that the minister’s words confirmed a decisive shift in policy by OPEC towards a return to market intervention.
The oil cartel seemed to have abandoned this role two years ago when it refused to step in to prop up sinking prices.
OPEC, the 14-nation cartel that controls over a third of the world’s oil, agreed on September 28 to a modest production cut, aiming to curb its current record high output to between 32.5 million barrels a day and 33 million barrels a day—a reduction of roughly one to two per cent.
A production cut is meant to reorder the supply and demand landscape and push prices up during a historic market slump.
Falih is joining an effort to get non-OPEC members to participate in output cuts, including Russia, which produces more crude oil than any other country.
Falih said he was in a meeting with Russia’s energy minister this week to discuss cooperation and said non-OPEC producers should “absolutely” participate in efforts to balance the market.
Meanwhile, Putin has given his country’s support to the global efforts to cut global production.
“We believe freezing or even reducing oil production is the only way to save the stability of the energy sector,” Putin told an energy conference in Istanbul, speaking through a translator. “Russia stands ready to join common efforts to limit oil production and urges others to do so as well,” he said.
Energy ministers from major oil producing countries, including Russia and Saudi Arabia are expected to hold meetings during the conference this week to hammer out a tentative agreement to limit oil supplies.
Oil prices rose around one per cent monday, approaching one-year highs, as speculators raised bets that oil prices would gain on the back of OPEC’s agreement to cut output levels.
Global benchmark Brent crude futures reached a high of $52.57 a barrel, not far off a one-year high of $52.86 a barrel, recorded on Friday, while US futures also gained ground, trading at $50.32.
The International Energy Agency’s chief, Faith Birol, told reporters in Istanbul that non-OPEC participation in the OPEC production cuts would help supply and demand rebalance faster than predicted.
“I think the role of responsible producers around the world, and Saudi Arabia considers itself to be the leading one, is to try to balance supply and demand in a very responsible way,” Mr. Falih told a conference in Istanbul this week that has become a meeting point for major oil producers to try to hammer out a tentative agreement to reduce output. It follows an agreement in principle reached in Algiers last month.