BREAKING: Russia And Saudi Arabia Agree To Freeze Oil Production Output

The world’s two biggest crude producers have agreed not to increase oil output, according to Qatar’s energy minister, quoted by Bloomberg. OPEC members, such as Venezuela and Nigeria, have been calling for an emergency meeting of the cartel to discuss crude prices that have fallen over 70 percent since 2014.

After meeting with Russian Energy Minister Aleksandr Novak, Saudi Oil Minister Ali Al-Naimi said freezing output at January levels would be “adequate” however the country still wants to meet the demand of its customers.

Earlier, Saudi Arabia had insisted that it wouldn’t cut production unless major producers outside the cartel cooperate. Russian Energy Minister Aleksandr Novak said that such cooperation is possible if other producers joined in.

However, the CEO of Russia’s biggest oil producer Rosneft Igor Sechin said last week that his company would defend traditional markets and raised doubts about production cuts. “Tell me who is supposed to cut? Will Saudi Arabia cut production? Will Iran cut production? Will Mexico cut production? Will Brazil cut production? Who is going to cut?” asked Sechin.

“We are working on preserving our traditional markets and we will supply those markets with oil in a competitive battle,” he added.

However, plummeting oil prices have forced producers unwilling to cut production to the negotiating table. While Venezuela has been by far the hardest-hit big crude producer, current oil prices make it difficult for Russia to balance its budget. Riyadh’s budget has also taken a hit , running an official $98 billion budget deficit in 2015. IMF estimates dispute official Saudi figures, placing the Kingdom's budget deficit at $140 billion.

“The back channel talks, which Qatar is brokering, had been in place for a while,” Amrita Sen, chief oil analyst at Energy Aspects Ltd told Bloomberg.

"These are still very early days and nothing concrete has been agreed, but there is a growing sense that countries could be more flexible, although Riyadh would insist that everyone else contribute to the cut,” she added.

Renewed hope of possible production cuts sent oil prices higher on Tuesday. Brent crude was up nearly six percent trading in London at over $35 per barrel, while US benchmark WTI futures were gaining over five percent to over $31 per barrel.