The four country’s oil ministers said that the deal would depend on other oil producers, including Iran, also agreeing to freeze production.
Speculation about possible crude production action has risen to fever pitch in recent weeks after Novak said in late January that OPEC was in talks with non-OPEC producers on holding a meeting in February to discuss potential options for tackling the supply glut because oil is now trading at multi-year lows of around $33-$34/b for benchmark Brent crude futures.
Russian Federation produced a post-Soviet record of 10.989 million barrels a day in January, while Saudi Arabia produced 9.95 million barrels.
The agreement should last at least three months because OPEC needs to understand the market’s reaction and give time for stocks to fall before it can consider cutting supplies, a person with direct knowledge of the country’s plans said earlier, asking not to be identified.
“Saudi Arabia and other Gulf nations, who remain heavily reliant on oil revenues, have been reeling from the oil price plunge since June 2014, and have been forced to implement major budget cuts”, he says.
The deal is preliminary and does not involve most of OPEC’s other major producers – although Qatar and Venezuela are involved.
Iran may be offered “special” consideration under the terms of the agreement reached earlier in the day by a group of key oil producing countries to freeze their output at current levels, according to an unconfirmed report citing Reuters.
“This is an announcement of a production freeze among countries whose production didn’t even grow recently”, Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt, told Bloomberg. “We want to meet demand and we want a stable oil price”.
United States shale production has also proved to be resilient, defying hopes that the low crude price would close down oil fields. Saudi Arabia is open the further co-operation.
The slump has been longer and deeper than anyone predicted, and the mood may be shifting among producers that have been determined to defend market share rather than prices.
Apart from Saudi Arabia, Qatar, Venezuela, Iran and Iraq, Opec member nations include United Arab Emirates, Kuwait, Libya, Algeria, Angola, Nigeria, Ecuador and Indonesia.
Naimi said Tuesday’s decision was “the beginning of a process which we will assess in the next few months and decide whether we need other steps to stabilise… the market”.