ISTANBUL—Russian President Vladimir Putin gave his support to international efforts to limit oil supply and boost prices Monday in the clearest sign yet that Russia might participate in moves to freeze or even cut output.
“We believe freezing or even reducing oil production is the only way to save the stability of the energy sector,” Mr. 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 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.
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The Organization of the Petroleum Exporting Countries, the 14-nation cartel that controls over a third of the world’s oil, agreed on Sept. 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 1% to 2%.
Speaking earlier on Monday, Saudi Arabia’s energy minister Khalid al-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% this year to $60 a barrel.
The minister’s words confirmed a decisive shift in policy by OPEC toward a return to market intervention—a role the oil cartel seemed to abandon two years ago when it refused to step in to prop up sinking prices. A production cut is meant to reorder the supply and demand landscape and push prices up during a historic market slump.
Mr. 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. Mr. Falih said he is 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.
Oil prices rose Monday on hopes that Russia would participate in a deal, with U.S. oil prices rising 1.55% to $50.58 a barrel. 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.
Saudi Arabia’s Energy Minister Khalid al-Falih pictured in June. He said Monday that an oil price of $60 a barrel by the end of the year is “not unthinkable.” PHOTO: REUTERS
“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.
Significant questions remain over the deal, including how much each country will cut and when. OPEC members Iran, Libya and Nigeria—where there have been significant oil-production disruptions—are exempt from cutting output, further clouding the deal’s effectiveness.
Mr. Falih said accommodating these members and managing uncertainties over the supply and demand balance in the market is the reason OPEC has set itself a range for its production volume rather than a hard target. He warned that the producer group must remain flexible to avoid a supply shock as the market tightens.
“I think a band would be able to make sure the ceiling can accommodate,” Mr. Falih said, adding that because of demand uncertainties “OPEC needs to make sure we don’t kill too much and create a shock.”
Oil ministers from a host of countries are gathering in Turkey this week for the World Energy Congress, an energy industry conference. OPEC energy ministers from Saudi Arabia, Qatar, Venezuela and Algeria are expected to use the gathering to hammer out more details of the planned production cuts.
Mr. Falih said the time to act seems to have arrived.
Oil prices crashed in 2014 after a wave of oil flooded the market as U.S. producers perfected extraction of crude from shale-rock formations deep underground. OPEC, especially its largest producer, Saudi Arabia, saw its traditional tool of production cuts as ineffective against American oil and instead ramped up production to record levels in a fight for market share.
The goal was to crush producers who needed prices as high as $100 a barrel to survive, causing production to fall on its own via market forces. But oil prices stayed lower for longer than many expected, hitting $27 a barrel this winter and staying below $50 a barrel for much of the year.
“I think market forces have shifted significantly between 2014 and now,” Mr. Falih said.
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