Russia Says Oil Output Freeze Needs at Least Year to Lift Prices

  • Oil states may meet next month to discuss issue, Novak says
  • Iran's need to boost production requires separate assessment

Russia said the oil output freeze it proposed with Saudi Arabia would need to last a minimum of 12 months to support prices.

“We need at least one year” to cut the global glut, Energy Minister Alexander Novak told reporters on a plane flying from Moscow to Minsk in Belarus on Thursday. Major oil-producing countries may agree on a freeze in mid-March and could evaluate “if the mechanism works” in June, he said.

Russia, Saudi Arabia, Venezuela and Qatar, seeking to curb an oversupply that’s seen prices drop to 12-year lows, reached a preliminary agreement last week to freeze output at January levels if other states join them. The needs of Iran, whose oil minister said the proposal was “ridiculous,” should be assessed separately, Novak said.

“We hear that they are not ready to cut oil production, not ready to freeze it,” Novak said. “There’s a need for individual and objective assessment of the situation in this case.”

A freeze puts “unrealistic demands” on Iran, which is seeking to increase production by 1 million barrels a day this year after international sanctions were lifted last month, Oil Minister Bijan Namdar Zanganeh said Wednesday, according to Shana news agency.

Iran Talks

Talks with Iran are continuing and a meeting with Zanganeh is possible next month, Novak said. 

Both Russia and Saudi Arabia, which together produce more than 20 percent of the world’s oil, have in the past few days dispelled rumors they might cut output. Cuts could be more effective, but would be difficult, Novak said. Even with last week’s pledge to freeze production, the imbalance in the oil market could be corrected by the end of this year or early in 2017, according to the minister.

If no agreement is found and “those who have the ability to increase production continue to increase it,” crude prices won’t recover for long, Novak said.

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