Russia says studying proposal for global oil production cuts

Thu Jan 28, 2016 6:29pm EST
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By Darya Korsunskaya and Rania El Gamal

ST PETERSBURG, Russia/DUBAI (Reuters) - Russia said on Thursday that OPEC had proposed oil production cuts of up to 5 percent in what would be the first global deal in over a decade to help reduce a glut of crude and prop up sinking prices.

It remained unclear whether Russian Energy Minister Alexander Novak was referring to a months old proposal by OPEC members Venezuela and Algeria or a new proposal backed by OPEC leader Saudi Arabia. Saudi officials did not immediately comment on the proposal, and a Gulf OPEC delegate said it came from Venezuela and Algeria.

For non-OPEC member Russia, the world's top producer, that would represent an output cut of around 500,000 bpd.

Benchmark Brent futures LCOc1 jumped as much as 8 percent to nearly $36 a barrel on hopes for a deal that could immediately reduce surplus global output by 1 million barrels per day (bpd). Brent was trading at around $34 a barrel at 1940 GMT.

Higher crude prices would be welcomed by oil-rich countries where the steep slide has squeezed budgets and caused political turmoil. Some countries have had to devalue their currencies.

"Indeed, these parameters were proposed, to cut production by each country by up to 5 percent," Novak said when asked if Saudi Arabia had made a proposal to cut output.

"This is a subject for discussions, it's too early to talk about."

Oil sank to 12-year lows of around $27 a barrel earlier this month, from as high as $115 some 18 months ago, as the U.S. shale oil boom boosted output and OPEC decided to pump more to fight for market share against higher-cost producers.   Continued...

Russian Energy Minister Alexander Novak attends a session of the Gaidar Forum 2016 'Russia and the World: Looking to the Future' in Moscow, Russia, January 14, 2016. REUTERS/Sergei Karpukhin