Talks of a cooperation between OPEC and Russia to reduce production have raised hopes in the international market as Russian Energy Minister Alexander Novak (photo), claimed that the country will hold talks with OPEC in February on a possible agreement to reduce output. “There are very many questions, on checking cuts, from what base to count from. In order to start working through these issues, we need general agreement, it’s too early to talk about that. That’s the subject of the meeting and discussion (in February),” Novak said.

Following this comments, the prices of oil on Thursday increased by more than 5%. Cooperation on production cuts between OPEC and Russia has always been a slim chance, and most likely will still remain an unlikely development. The big difference at this time is Russia’s willingness. Saudi Arabia had voiced its willingness last year to agree to a 5 % reduction if Russia and other large producers including Iraq, Iran are willing to do the same.

 Meanwhile Analysts have dispelled possibilities of a cooperative reduction of oil production by OPEC and Russia, saying the market's early positive reaction was based on false hope. “Talk of an OPEC cut is likely no more than an attempt to shift market sentiment. We remain skeptical about a change”, Michael D. Cohen commodities analyst at Barclays in New York said.

According to Analysts, a 5 % production cut from Russia and OPEC will be about 2 million bpd. This will represent a fall in the overflow of crude that has swamped the international market, resulting to a price slide.

"If you get the cuts, then it would be minus 2 million from those guys, but plus 1 million from Iran. I don't think that flies. There seems to be a softening of the position by Russia and Iraq, so they may be willing to entertain the notion, but Iran seems to be holding to their line that they want to increase as they come back from sanctions”, Michael Wittner at Societe Generale in New York commented.

An increasing flow of crude has made the international market unstable, making prices drop above 60 % since mid-2014 as output from U.S. shale and deepwater projects has overcome demand.

Anita Fatunji