Crude oil: Saudi Arabia offers to curb output if Iran accepts ceiling. The latest news on the Algeria meeting set to take place this weekend and into the early part of next week is that Saudi Arabia reportedly sent an offer to Iran, proposing a cut to its output if Iran agreed to limit production at its current level of 3.6 million barrels per day. "They (the Saudis) are ready for a cut but Iran has to agree to freeze," a source told Reuters. Discussion took place in Vienna at OPEC headquarters this past week, but so far reports suggest there has been no agreement. Bloomberg surveyed oil analysts and 21 out of 23 respondents said that there would be no agreement in Algeria.
Meanwhile, rising output in Nigeria and Libya make the production freeze negotiations look even less important. Several hundred thousand barrels per day from the two troubled OPEC members would more than outweigh any effect from an output cap.
Russia invests in brownfields, expects output to climb. The FT published a must-read article on Russia’s campaign to boost oil production from aging oil fields in Siberia. Ramping up drilling in existing brownfield sites, as opposed to drilling in frontier regions like the Arctic, is a shift of focus for Russia’s oil industry. But the more aggressive approach to maintaining and even increasing oil flows from some of Russia’s old but still massive oil fields could allow it to increase output in the next few years, defying expectations of steady declines. Rosneft will more than double its drilling rate from 750 wells in 2014 to 1,700 per year beginning in 2017. It is also improving its drilling techniques, incorporating fracking and horizontal drilling. But the quest also raises questions about the wisdom of elevating production at all costs, which could damage long-term output. In any event, Russia’s need for tax revenue has it going down this path, but that could also make it difficult for Russia to sign on to any OPEC production freeze agreement.
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