Saudi formin says would go along with a freeze if oil producers agree one

LONDON, Sept 6 (Reuters) - Saudi Arabia said on Tuesday it would go along with a freeze in oil output if other producers agreed one but cautioned that Iran could foil any attempt to limit output.

"If there's a freeze, Saudi Arabia will go along with it and we are hoping there could be a meeting of the minds when this comes together," Saudi Foreign Minister Adel al-Jubeir told reporters in London.

"I believe again the spoiler will be the Iranians. You can't expect other countries to freeze while you reserve the right to increase your production. The Russian position is more in line with our position than not," he said. (Reporting by Estelle Shirbon; editing by Guy Faulconbridge)</s>CLOSE

Russian President Vladimir Putin (L) meets with Saudi Arabia's Deputy Crown Prince Mohammed bin Salman (R) during the G20 Summit in Hangzhou, China, on Sept. 4, 2016. (Photo: Yuri Kochetkov, EPA)

Oil prices rose Monday after Russia and Saudi Arabia announced they would cooperate on stabilizing oil output.

The two top oil-producing countries plan to hold a Russia-Saudi Arabia task force on oil and gas next month, the Russian and Saudi energy ministers Alexander Novak and Minister Khalid al-Falih announced Monday in a joint statement at the G-20 summit in China.

Their countries "recognized the need to restrain an excessive volatility of the oil market" and agreed to act together "in order to stabilize the oil market," they said in the statement.

Neither offered specifics on what actions might be taken. Russia is not a member of OPEC (Organization of the Petroleum Exporting Countries), but earlier this year supported a freeze in production. Saudi Arabia also supported a freeze, however OPEC members Iran and Iraq were non-committal.



Russia is open to a freeze, Novak told BBC News, and called the agreement on a task force a "historical moment" between OPEC members and non-members.

Some sort of compromise is needed to bring stability to oil, Russian President Vladimir Putin said in a pre-G-20 interview with Bloomberg released Monday. "I would very much like to hope that every participant of this market that’s interested in maintaining stable and fair global energy prices will in the end make the necessary decision," he said.

Oil prices have risen more than 30% so far this year after hitting historic lows of below-$40 per barrel prices. However, they remain far below the $100 or more fetched two years ago.

Upon news of the Russia-Saudi Arabia statement, the price of Brent crude oil, used to price international oils, rose by 4% but then fell to 1% higher at $47.31 a barrel.

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Read or Share this story: http://usat.ly/2ctHeQe</s>The joint statement was signed by the country's energy ministers in China on the sidelines of a Group of 20 summit and followed a meeting between Russian President Vladimir Putin and Saudi Deputy Crown Prince Mohammed bin Salman.

Russian Energy Minister Alexander Novak said the two countries were moving toward a strategic energy partnership and that a high level of trust would allow them to address global challenges. Saudi Energy Minister Khalid al-Falih said the agreement would also encourage other producers to cooperate.

Oil prices LCOc1 soared almost 5 percent ahead of a news conference by the two ministers, but pared gains to trade up 2 percent by 6.30 a.m. ET as the agreement yielded no immediate action.

"There is no need now to freeze production ... We have time to take this kind of decision," Falih said.

"Freezing production is one of the preferred possibilities, but it does not have to happen specifically today."

Even if the Monday statement was short on action, it marks a significant development in the Russia-Saudi relationship. The two countries have been effectively fighting a proxy war in Syria and Moscow also sees itself as a big ally of Iran - Riyadh's arch-rival in the Middle East.

The Organization of the Petroleum Exporting Countries will hold informal talks in Algeria later this month, and is next scheduled to meet officially in Vienna in November.

Several OPEC producers have called for an output freeze to rein in the glut, which arose as supplies from high-cost producers such as the United States soared.

The price collapse of the past two years has hit the budgets of major producers such as Russia and Saudi Arabia while leading to unrest and social tensions is smaller producing nations such as Venezuela and Nigeria.

OPEC's de facto leader Saudi Arabia has also signaled willingness to cooperate as it faces budget pressures and seeks to float a stake in state-owned producer Aramco.

Venezuela, which has consistently pushed for a deal to boost prices, hailed the agreement as "an important step in coordinating joint action between the biggest OPEC member and one of the biggest non-OPEC producers".

Venezuela has presented an "alternative proposal" to be considered at the upcoming Algeria meeting that would help "stabilize both the volume of supplies to markets and the fair price for producers," the Oil Ministry said in a statement.

The statement did not offer further details on the proposal.

Any deal between OPEC and non-OPEC producer Russia would be the first in 15 years since Moscow agreed to cut output in tandem with the cartel at the turn of the millennium, although Russia never followed through on that promise.

Novak said he was open to ideas on what cut-off period to use if producer countries decided to freeze output.

If production is frozen at early-2015 levels, it would effectively mean an output cut as most producers - including Saudi Arabia, Russia, Iraq and Iran - have steeply boosted production since then.

Novak said outright oil production cuts may also be discussed.

In April, Russia was prepared to freeze output together with OPEC, but talks collapsed after Riyadh said it would agree to a deal only if Iran - OPEC's third-largest producer - participated.

Iran has argued that it needs to regain market share lost during years of Western sanctions, which were lifted in January.

Putin said last week that a new deal on oil output could involve some compromise on Iranian output.

"We believe that the oil market rebalancing has been rather delayed ... And certainly joint actions which were considered at the beginning of the year, including a freeze, could have drawn much nearer the date of rebalancing of the respective markets," Novak said on Monday.

"We are ready, if there is such a decision, to join" an oil output freeze, TASS news agency cited Novak as saying.

Oil prices collapsed to as low as $27 per barrel earlier this year from as high as $115 in mid-2014, but have since recovered to around $50.

"The market is getting better and we noticed that the prices reflect this (improvement)", said Falih. "A coordinated and appropriate, collective decision on production will help bring balance and reduce inventories in a more timely manner".</s>MOSCOW (AP) — The world's two largest oil producers, Russia and Saudi Arabia, on Monday agreed to act together to stabilize global oil output, though it's unclear what that might entail.

Energy ministers Alexander Novak and Minister Khalid al-Falih met Monday on the sidelines of the Group of 20 nations' summit in China. A joint statement released by Russia said both ministers "recognized the need to restrain an excessive volatility of the oil market" and agreed to act together "in order to stabilize the oil market."

Novak and al-Fatih said they would chair the first Russia-Saudi task force on oil and gas in October.

Russia, which is not a member of the oil producing nations' group OPEC, this year supported calls to freeze production, but the efforts fell through after OPEC member Iran opposed the plan.

It was not clear from the joint statement what exactly Russia and Saudi Arabia would be prepared to do to help prop up the markets but the Russian minister mentioned a production freeze.

"We believe that the market right now is taking too long to balance out, it's been two years, and joint steps which were considered earlier this year including a production freeze could be a great help in helping to balance the markets as soon as possible," Russian news agencies quoted Novak as saying.

Speaking to reporters after the meeting, al-Falih, the Saudi minister, said in comments carried by the Interfax news agency that the freeze "is not the only solution" but refused to elaborate.

The price of oil jumped on the countries' statement. The U.S. contract rose 2.2 percent, or 99 cents, to $45.43 a barrel in electronic trading on the New York Mercantile Exchange.</s>It looks like major oil producers might finally be ready to play nice.

Saudi Arabia and Russia have signed an agreement aimed at stabilizing the oil market, according to state-owned Russian news agency TASS.

The two countries have pledged to set up a working group, along with other measures aimed at supporting a market that has been rocked by an epic price collapse since 2014. Oil prices gained 3% early Monday.

The agreement was announced on the sidelines of the G20 summit in Hangzhou, China. It should help set the agenda for an informal meeting between OPEC and other producing nations later this month in Algeria.

Closer collaboration between the world's top two exporters of crude oil may stoke hopes that OPEC and other big producers will agree to freeze production. The idea is that an output cap will help put a floor under prices, which have risen from $26 per barrel in February to $46 but are still down more than 50% since 2014.

Related: Oklahoma earthquake and oil drilling: What we know

Critics say any freeze would be mostly symbolic -- OPEC is pumping more oil than ever before, and freezing production at extremely high levels wouldn't really help fix an oversupplied market.

Oil prices have bounced before on similar hopes, only for them to be dashed. The most recent attempt to freeze production in April failed spectacularly.

The lack of cooperation in the face of a two-year price collapse reflects a schism within OPEC between its biggest member -- Saudi Arabia -- and Iran, which is increasing production after years of international sanctions.

It was not immediately clear on Monday how Iran would react to the agreement between Russia and Saudi Arabia.

Russia is not a member of OPEC, but it could send a representative to the meeting in Algeria later this month.

Saudi Arabia has been leading the OPEC strategy of produce or bust to defend its market share. The kingdom pumped 10.5 million barrels per day in July, up by 30,000 from June and a new record. Iraq, Iran and the United Arab Emirates also boosted their output, compensating for shrinking production from embattled OPEC members Nigeria and Venezuela.

Meanwhile, there are signs that U.S. shale companies are also drilling more. If prices rise further, that trend is likely to continue.</s>Russian President Vladimir Putin (right) and Saudi Arabia Deputy Crown Prince Mohammed Bin Salman (left) meet during the G-20 Summit in Hangzhou, China on Sunday (Anadolu photo)

HANGZHOU, China — The world's two biggest oil producers Saudi Arabia and Russia said Monday they had agreed to "act together" to try to stabilise oil prices, but failed to make headway on a production freeze.

The two nations "noted the particular importance of constructive dialogue and close cooperation between the largest oil-producing countries with the goal of supporting the stability of the oil market and ensuring a stable level of investment in the long term," the energy ministers from both countries said.

Their comments came in a joint statement after a meeting at the G-20 summit in China.

"To this end the ministers agreed to act together or in cooperation with other oil producers," the statement said, adding they had agreed to set up a "joint monitoring group" to offer recommendations aimed at preventing price fluctuations.

Russia's Energy Minister Alexander Novak described the announcement as marking a "new era" in cooperation between Russia and Saudi Arabia and insisted it would have a "critical significance" for oil markets, news agency Interfax reported.

But there were no details in the announcement on any elusive agreement to freeze oil output, just weeks before Moscow and OPEC meet in Algeria to discuss the crisis.

The globe's major oil producers have been unable to strike a deal on freezing output, due mainly to a dispute between Saudi Arabia and Iran over Tehran's desire to raise production levels after the lifting of sanctions.

Saudi Arabia's Energy Minsiter Khaled Al Faleh told Al Arabiya television channel there was "currently no need to freeze production" after meeting Novak.

"A freeze is one of the preferred options but it is not needed for the moment," he said.

President Vladimir Putin met Saudi Deputy Crown Prince Mohammed bin Salman on the sidelines of the G-20 on Sunday and said they would work to address a global glut and overproduction that has hammered prices for the past two years.

In an interview ahead of the meeting Putin — whose economy slumped into recession on the back of oil price falls — said that a freeze was "the right decision" and called for "compromise".

The oil market has been plagued by a stubborn supply glut that saw prices plunge to near 13-year lows below $30 at the start of 2016. While it has recovered recently, it is still well off highs above $100 seen in mid-2014.</s>Russia, Saudi Arabia to set up task force to secure oil market stability

BEIJING, Sept 5 (Reuters) - Russia and Saudi Arabia agreed to set up a task force to review oil market fundamentals and to recommend measures and actions that will secure oil market stability, according to a joint statement issued on the sideline of G20 summit on Monday.

Saudi Arabia has signed an agreement to seek cooperation in the oil market with Russia, Energy Minister Khalid al-Falih said at a news conference at the G20 in the eastern Chinese city of Hangzhou.

Russian Energy Minister Alexander Novak said at the news conference that cooperation with Saudi Arabia includes ways to stabilize global oil markets, including limiting oil output.

Russia and Saudi Arabia are the world's first- and second-largest oil producers, respectively.</s>TOKYO, Sept 7 (Reuters) - Oil prices inched lower on Wednesday as market participants remained sceptical that producers will reach an agreement to freeze output to rein in a global supply glut.

London Brent crude for November delivery was down 4 cents at $47.22 a barrel by 0018 GMT, after settling down 37 cents on Tuesday.

NYMEX crude for October delivery was down 8 cents at $44.75, after settling up 39 cents on Tuesday.

Oil prices hit a one-week high on Monday after Russia and Saudi Arabia agreed to cooperate on stabilising the oil market, but they have since fallen due to the mounting uncertainty over a deal.

The Organization of the Petroleum Exporting Countries and non-OPEC producers such as Russia will hold informal talks in Algeria on Sept. 26-28, but many in the market are sceptical a deal will happen.

Saudi Arabia's Foreign Minister Adel al-Jubeir said on Tuesday it would go along with a freeze in oil output if other producers agreed one but cautioned that Iran, which is aiming to raise output to pre-sanction levels, could foil any attempt to limit output.

Iran, however, signalled on Tuesday it was prepared to work with Saudi Arabia and Russia to prop up oil prices as it began to bargain with OPEC on possible exemptions from output limits.

On demand, traders said Genscape data showed a draw of some 700,000 barrels last week at the Cushing, Oklahoma, delivery hub for U.S. crude futures.

U.S. commercial crude inventories likely fell by 100,000 barrels last week after rising for two straight weeks, a preliminary Reuters poll showed on Tuesday.

Gasoline stocks likely fell by 500,000 barrels, while distillate stocks are forecast to have increased by 1 million barrels, the poll showed.

The American Petroleum Institute is set to release the weekly oil data on Wednesday, delayed a day from usual due to the Labor Day holiday on Monday. (Reporting by Osamu Tsukimori; Editing by Richard Pullin)</s>Russia says discussing with S.Arabia parameters of output freeze deal

MOSCOW, Sept 5 (Reuters) - Russia and Saudi Arabia are currently discussing concrete parameters of an oil output freeze deal, Russian Energy Minister Alexander Novak said in a statement on Monday after talks with his Saudi Arabia counterpart.

"We have agreed with Saudi Arabia energy minister on joint actions aimed at stabilising situation on the oil market. We consider a production freeze the most efficient tool, concrete parameters are being discussed at the moment," Novak said. (Reporting by Katya Golubkova; Editing by Maria Kiselyova)</s>The rise of fracking has reshaped the global energy landscape.

It recently hit a new milestone in the U.S. Fracking now accounts for more than half of all U.S. oil output, according to the Energy Information Administration. It's a stunning feat considering fracking made up less than 2% of American oil production in 2000.

Hydraulic fracturing technology, more commonly known as "fracking," paved the way for drilling into America's enormous shale deposits. It has fueled a dramatic boom in U.S. oil production.

Back in 2000, there were just 23,000 fracking wells pumping about 102,000 barrels of oil a day. Now there are 300,000 fracking wells, churning out 4.3 million barrels per day.

Fracking "has allowed the United States to increase its oil production faster than at any time in its history," the EIA said in recent report.

U.S. output has nearly doubled over the past decade and America only trails Saudi Arabia and Russia globally.

That surge in American crude is one of the main reasons why there is a global glut in oil that keeps getting worse. The excess supply caused oil prices to peak in mid-2014 and crash as much as 75% since then.

"Prices are where they are because shale has been so phenomenally successful. It's changed the whole pricing paradigm," said Tamar Essner, director of Nasdaq's energy team.

So how does fracking work?

Fracking involves shooting a mixture of mostly water and sand under high pressure against a rock formation until it fractures. The sand fills the fracture, forcing crude oil out of the rock formation.

Fracking has been criticized for its potential environmental consequences, including water contamination and earthquakes. These concerns were summed up in a 2010 HBO documentary called "Gasland" that focused on communities impacted by natural gas fracking.

Shale oil is not a new discovery. It's actually been around for 60 years. What's new is that the technology has vastly improved in recent years.

Innovation has made previously-expensive fracking much more efficient. High oil prices before and after the Great Recession lured tons of investment dollars into this space, fueling a technological revolution. Investors were also motivated by extremely low interest rates to borrow cheap and invest in this technology.

The fracking revolution first hit the natural gas space, fueling a wave of production in giant shale fields such as the Barnett and Marcellus spread across Texas, New York, Pennsylvania and Ohio. But a supply glut quickly formed in natural gas, causing prices to crater.

Related: Saudis to take control of largest U.S. refinery

Days of $100 oil gone for now thanks to fracking

Fracking then spread to shale oil fields, led by the Eagle Ford and Permian Basin of Texas and the Bakken formation of North Dakota. This turned out to be a game changer because it brought about a ton of new supply that was cheaper to drill than deepwater projects or even the Canadian oil sands.

"The incremental amount of new supply was really underestimated. I don't think any OPEC member took shale seriously until maybe two years ago," said Essner.

The other game-changing characteristic of fracking shale oil is how fast the entire process is. While deepwater production in places like the Gulf of Mexico require tons of lead time, shale wells can be drilled and start pumping oil relatively quickly.

The "fast-cycle" nature of shale is one of the reasons many believe the days of $100 oil are gone for now.

Lately, shale drillers have dialed down pumping and U.S. oil output has declined a tad in recent months because oil prices fell as low as $25 a barrel.

However, everyone expects some of these oil fields to be easily switched back on the minute oil prices hit levels where they can make money. For some shale oil fields that price can be as low as $40 a barrel.

"It puts a ceiling on how far and how fast prices can go up," Essner said.
Russia and Saudi Arabia agree on a plan to manipulate oil output.