OPEC, Russia see smooth road to deal on output cut

Russia and Saudi Arabia said they expect OPEC and nonOPEC producers to reach an agreement on Saturday to curtail oil output and prop up prices in the first such joint move since 2001.

"We have a deal already. We are just putting the final touches. Everything is good!" Khalid al-Falih, energy minister of OPEC’s de facto leader and top oil exporter Saudi Arabia, told reporters.

Russian Energy Minister Alexander Novak, speaking as he joined a breakfast with OPEC and non-OPEC ministers in Vienna, said: “I don’t see such risks (of a deal failing).”

The Organisation of the Petroleum Exporting Countries began a meeting with producers from outside the group at 0930 GMT, hoping non-OPEC will commit to cutting 600,000 barrels per day after its own members agreed a reduction of 1.2 million bpd last week.

Oil prices have more than halved in the past two years after Saudi Arabia raised output steeply in an attempt to drive higher-cost producers such as US shale firms out of the market.

The plunge in oil to below $50 per barrel — and sometimes even below $30 — from as high as $115 in mid-2014 has helped reduce growth in US shale output.

But it also hit the revenues of oil-dependent economies including Saudi Arabia and Russia, prompting the two largest exporters of crude to start their first oil cooperation talks in 15 years.

OPEC Secretary-General Mohammed Barkindo said he expected 12 non-OPEC countries to sign a declaration with the organisation and fully contribute to cuts of 600,000 bpd or more.

“This is a very historic meeting ... This will boost the global economy and will help some OECD countries to reach their inflation targets,” Barkindo told reporters, referring to the Organisation for Economic Cooperation and Development, which groups most of the world’s richest economies.

OPEC sources said nonOPEC Azerbaijan, Kazakhstan, Oman, Mexico, Russia, Sudan, South Sudan, Bahrain and Malaysia would attend the meeting. Bolivia may also attend and Barkindo said Brunei had sent its commitments but would not be present.

Many non-OPEC countries such as Mexico and Azerbaijan face a natural drop in oil production and several OPEC ministers going into the breakfast said the discussions would focus on whether those declines should be counted as contributions. REUTERS

Oil prices have more than halved in the past two years after Saudi Arabia raised output steeply in an attempt to drive higher-cost producers such as US shale firms out of the market