Why Russians and Saudis could cut oil output

Early signs of oil bottoming: Tom Petrie

The market is seeing early signs of an oil price bottom as Saudi Arabia and Russia begin to feel the pressure stemming from the glut, Petrie Partners Chairman Tom Petrie said Thursday.

Oil prices rallied in the last two sessions and surged Thursday on hopes that top oil producer Russia will cooperate with OPEC and the Saudis to strike a deal to tackle oversupply through production cuts.

Saudi Arabia has led OPEC's policy of keeping production steady and defending market share. But Petrie, who has advised the Saudis on oil policy, said Russia and Saudi Arabia now have a common interest in somewhat better prices.

"Both of them are more in need of an improving price picture than I think has generally been recognized," he told CNBC's "Squawk Box." "When you load in their social and security costs, it's quite clear that somewhere around $30 per barrel really begins to pinch them."

"This is the year for the inflection point," he added.

An oil site in the middle of the Rub' al Khali desert, Saudi Arabia.
Saudis 'ready to cooperate' on crude output: Report

Petrie made his comments shortly before Russian Energy Minister Alexander Novak said Thursday that Saudi Arabia had proposed to cut oil production by up to 5 percent by each country in order to support weak oil prices.

After Novak made this claim, OPEC delegates responded by saying there were no plans to hold talks to cut production, according to reports.

Petri said he believes oil and gas exporting nations like Russia and Saudi Arabia can live with the short-term pain of selling less crude. "They don't have to cut back much. It's a matter of taking the foot off the pedal just a little," he said.

As for the Saudis' more than yearlong output strategy, Petri said they had successfully forced high-cost producers such as U.S. shale drillers to reallocate capital away from developing new oil production last year, and those capital spending cuts will continue in 2016.

"In all likelihood, with those two back-to-back years, they will have accomplished much of what their goal was with respect to that," Petrie said. "And they've also sent signals to both Iran and Russia that this is not a great path for any of them on a long-term basis."

Oil tanker train.
Three reasons the oil bottom is not in yet: Citigroup's Morse

Oil and gas projects around the world worth $380 billion have been postponed or canceled since 2014, according to Wood Mackenzie, an energy consultancy.

Neil Dwane, Allianz Global Investors global strategist, said a production cut is unlikely based on his conversations with clients in the Middle East.

Allianz is constructive on oil because the firm doesn't buy the oversupply story, he said Thursday.

"We think the data is very, very fuzzy, and therefore we don't think the world is awash with oil," he told CNBC's "Squawk on the Street."

— Reuters contributed to this article.