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Oil in Global Economy Series: Russia rules out cooperation with OPEC

The embarrassing failure of the ‘Doha talks’ in April still weighing over oil politics. Both OPEC and non-OPEC producers met in Doha with the hope that there could be global coordination on oil production but Saudi Arabia’s stance that they will not cut without the participation of Iran came as a big surprise.

Russian energy minister Alexander Novak speaking in an interview this week ruled out any possibility of coordination with the OPEC producers. Mr. Novak said, "We do not discuss the issues of coordination of actions between Russia and OPEC... We can't agree on production cuts as we don't have such tools and mechanisms".

The oil price has recovered lots of ground after reaching 13-year low around $27 per barrel in late January but current price below $50 per barrel isn’t sustainable enough, especially in terms of investments. OPEC led Saudi Arabia didn’t cut down production unlike the 80’s to force high-cost producers from the market. Recent data shows the plan has somewhat worked. OPEC’s share at global oil output has reached around 35 percent, highest since the 70’s. However, that isn’t sufficient to push Russia out of the market, which has also been increasing production. Previously, Mr. Novak said that the depreciation has pushed production cost down around $5 per barrel and Russia is ready to fight low price.

Last year, Russian production reached 30-year high, 10.7 million barrels per day and Mr. Novak said that he expects production to rise by 1-2 percent this year. He said that he expects the market to fall into balance by mid-2017, depending on the policies of Saudi Arabia.          

Mr. Novak is set to meet Khalid al-Falih, new Saudi counterpart in September at a conference in Algeria.

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