Russia’s Novak Says G-20 Talks Will Clarify Uncertain Oil Market

(Bloomberg) --

Just days before OPEC and its allies meet to discuss whether to extend oil-production cuts into the second half of the year, Russia and Iraq hinted at progress toward a deal.

Discussions between leaders at the Group of 20 Summit in Japan, which include a meeting on Saturday between President Vladimir Putin and Saudi Crown Prince Mohammed Bin Salman, will clarify uncertainties about the oil market before the OPEC+ talks, Russia’s Energy Minister Alexander Novak told reporters on Friday.

While Novak remained carefully non-committal about whether the oil producers will prolong output cuts -- as he has done for weeks -- Iraq’s Oil Minister Thamir Ghadhban said he sees Russia starting to align with the rest of the group in support of an extension.

Russia’s Novak Says G-20 Talks Will Clarify Uncertain Oil Market

“We hope that there will be more clarity and more visibility after the G-20 summit,” Novak told reporters in Osaka, Japan when asked if he expects an extension of the OPEC+ cuts. “We hope that decisions to be taken will help shed some light” on the future of the oil market.

While the G-20 leaders’ summits traditionally focus on a wider range of issues from geopolitics to climate change, recent meetings have also set the stage for policy decisions from the Organization of Petroleum Exporting Countries and its allies. In December, Putin and Prince Mohammed used the event in Buenos Aires to agree on extending their output agreement, days before their oil ministers met.

This year, the Saudi and Russian leaders have scheduled a meeting on the G-20 sidelines again, with oil-market issues on their agenda, according to the Kremlin. Novak held talks with his Saudi counterpart Khalid Al-Falih in Osaka on Friday, emphasizing the benefits of economic cooperation beyond the OPEC+ deal that have boosted trade and investment, according to the Russian Energy Ministry’s Twitter feed.

“We discussed the conditions of international petroleum markets, various options for the extension of the OPEC agreement,” Al-Falih said on Twitter. The talks also covered “deepening trade and investment cooperation between our two countries.”

Wait and See

So far, the Kremlin has been sticking to a wait-and-see approach regarding the future of the deal, in contrast to the position of Saudi Arabia’s strong advocacy of an extension. The idea of a roll-over has faced opposition from Russia’s largest oil producer Rosneft PJSC, which argues that the agreement reduces the nation’s share in the global oil market.

Russia has recently given statements in favor of extending the cuts, Ghadhban said in a Bloomberg TV interview in London. Iraq supports prolonging the OPEC+ deal, which has prevented oil falling as low as $40 a barrel, he said. The current supply reduction of 1.2 million barrels a day may not be deep enough to deal with the supply glut, but Iraq won’t necessarily propose further cuts, he said.

On Wednesday, Putin gathered oil executives to discuss the future of the OPEC+ agreement, according to an interview he gave to the Financial Times. The companies “take a comprehensive view of the situation,” not focusing only on production growth, the president said.

When asked by the FT if OPEC+ will extend the deal, Putin said: “You will find this out in the next few days.”

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