Will Saudi Arabia listen to Putin?
September 2, 2016, 6:14 pm

Putin says that those who are committed to creating a stable oil market should agree to a production cap [Xinhua]

This is the first time the Russian president weighs in publicly on what has become a farce among oil investors and analysts as repeated year-long efforts to reach consensus among major producers have collapsed.

“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,” Putin said in the Bloomberg interview.

Oil prices went into a spin throughout August as oil markets first reacted positively to news that an oil production cap was imminent, but then spiraled downward nearing below $40 a barrel when it appeared some OPEC countries no longer had the drive to hold another emergency meeting.

And if the last scheduled summit is to provide any clue, significant divisions remain between Iran and Saudi Arabia, both of whom are fighting proxy wars in many parts of the Middle East.

Divisions over the issue of output ceilings versus country production quotas turned the semi-annual meeting in Vienna last June into another defunct forum where no decision was taken on how to tackle low global oil prices.

Oil producer Saudi Arabia was said to have been reconsidering output ceilings – which it nixed last December as it proceeded to boost its production capacity – as a means to spur oil prices to increase.

But Iran, which is regaining its heavyweight status now that US sanctions have been removed, says an output ceiling is of no interest to its market strategies. It says any such move must be accompanied with a country quota system. This argument has support among some of the less powerful OPEC members such as Venezuela and Algeria.

Tensions are still frayed from the last time OPEC members met – in Doha with non-OPEC members such as Russia – when Iran failed to turn up at the forum and instead said it would not abide by any production cap.

The Saudis blame Iran for the failure of the Doha talks; Iran at the time had increased its output by about 500,000 barrels and was headed to a total post-sanctions increase of one million barrels.

During his interview with Bloomberg, Putin said it was unfair to expect Iran put a ceiling on their output just as they were emerging from decades of international isolation.

The BRICS Post with inputs from Agencies