World’s Oil Producers To Meet on Supply ... in Moscow
March 9, 2016 (EIRNS)—When not acting to compose Obama’s wars in the Middle East, Vladimir Putin’s Russia appears to be taking time out to compose the world oil markets. After two months of quiet but determined diplomatic efforts and a preliminary agreement with Saudi Arabia, Putin’s oil flank is coming more out in the open. CNBC-TV reported today that on March 20 in Moscow, Russia will host a meeting of major oil producers both inside and outside OPEC—not including United States—“to discuss an output freeze, an Iraqi oil official told state newspaper Al-Sabah.”
Russia is not a member of OPEC, the Organization of Petroleum Exporting Countries, but oil export revenue plays a significant role in its overall government revenue.
There is already considerable shouting from sources like the London Telegraph, BBC, and ZeroHedge.com that “Putin is taking control of OPEC,” or that “Putin is taking charge of a new and larger OPEC.” ZeroHedge wrote again, today, that Russia’s “production freeze” was a fraud, in their view, and that China’s demand for oil will soon be falling, etc.
But in fact, Asia has been the only source of any increases in demand for oil for two years, and through agreements with China, Russia has increased the share of its oil going to Asia.
Oil prices have stabilized and then gradually risen since the Russian initiative began in late January. Today it approached $38/barrel for West Texas Intermediate grade, from the low of about $26 in early February, when Wall Street analysts were all forecasting $20- and even $10-per-barrel oil.
The initiative has been aided by the fact that U.S. shale production has been falling, by nearly 1 million barrels/day so far. For the 11th week in a row, the U.S. oil rig count declined (down 8 this week to 392, from more than 1,800 two years ago). This is the first drop below 400 oil rigs since Dec 2009. Total U.S. oil-plus-gas rigs dropped to 489 last week. just one higher than the all-time record low seen in April 1999.