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Let's consider freezing oil production, Russia says

Nation's energy minister says a freeze is one tool to use, but a cut would be needed to meet a proposal.

By Daniel J. Graeber
Let's consider freezing oil production, Russia says
Russia's energy minister says a freeze in production one tool under consideration to correct a market imbalance, though data show a cut would likely be needed. Photo by ekina/Shutterstock

DOHA, Qatar, Nov. 18 (UPI) -- Major oil-producing nations could implement a freeze in output levels as a tool to bring the market back into balance, Russia's energy minister said Friday.

Ministers and representatives from oil-producing nations met in Doha on the sidelines of the Gas Exporting Countries Forum to discuss a potential agreement to limit output under the general terms of a proposal tabled in Algeria in September.

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Russian Energy Minister Alexander Novak said talks so far on coordinating around that agreement were constructive and all parties to the proposal were circling around a general theme.

"The freeze, which was discussed in the course of the year is, in our opinion, currently one of the tools that can seriously balance the market," he was quoted by Russian news agency Sputnik as saying.

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Members of the Organization of Petroleum Exporting Countries are working to build consensus around an agreement to hold output at around 32.5 million barrels per day, the low end of the proposal offered from Algeria. OPEC last reported that its 14 members produced a combined average of 33.6 million barrels per day, an increase of 240,000 bpd from the previous month. That's above the high end of the Algerian proposal, meaning a cut, not a freeze, would be necessary to implement the agreement.

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Russia's position on the production proposal has been fluid. Novak's deputy, Kirill Molodtsov, said a 5 percent cut in production was "technically" possible based on discussions with oil companies over the last year. About a week the September meetings in Algeria, Novak said there were no considerations for a cut in output from Russia.

A profile of Russian energy companies from Moody's Investors Service said low production costs are paying off, with September oil production of 11.1 million bpd setting a new post-Soviet record

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Denis Perevezentsev, a senior credit officer at Moody's, said last month that companies like Russian oil major Rosneft should be in a strong position assuming oil prices hold at an average of $45 per barrel next year.

OPEC and non-OPEC members are working to offset a decline in crude oil prices brought on by lackluster demand from a weak global economy and a surplus in oil on the market. Crude oil prices moved above $50 per barrel after the meetings in Algeria, but have settled near the $45 range as doubts linger over the OPEC production proposal.

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