The head of Russian state-run oil company Rosneft on Wednesday floated the idea of a coordinated output cut by major oil-producing countries to prop up sagging prices but fell short of saying whether Moscow would contribute to such a plan.
Rosneft Chief Executive Igor Sechin, a close ally of President Vladimir Putin, told the IP Week conference in London that the global oil glut was predominantly the fault of the Organization of the Petroleum Exporting Countries (OPEC).
related investing news
Sechin suggested major oil producers cut production by 1 million barrels per day (bpd) to reduce oversupply, which he estimated at 1.5 million bpd.
"A coordinated supply cut by major exporters by around 1 million barrels per day would sharply reduce uncertainty and would move the market towards reasonable pricing levels," he said.
Oil prices have slumped more than 70 percent to near $30 a barrel over the past 18 months as supply exceeded demand after OPEC, seeking to drive higher-cost producers out of the market, decided not to cut production.
Sechin has in the past criticised OPEC's strategy, saying the group, of which Russia is not a member, had "lost its teeth". He has also said Moscow would never cooperate with OPEC as Russia's oil industry could withstand any price rout thanks to cheap labour and a weak local currency.
On Wednesday, Sechin gave similar messages but chose his words more carefully, rarely mentioning OPEC and blaming only "some producers" for creating the glut.
Oil markets have risen in recent weeks on hopes of a deal between OPEC and non-OPEC producers after a number of Russian officials suggested dialogue should begin.
But Putin has not spoken yet on the subject. Wednesday's speech by Sechin was also his first statement on the subject in recent weeks.
Sechin declined to say whether Russia would participate in any coordinated cut, when quizzed by reporters after the speech.
"Who are we supposed to be talking to about cuts? Will Saudi Arabia or Iran cut production?" Sechin asked.
Struggling oil-producing countries have urged OPEC leader Saudi Arabia in recent weeks to call a special meeting to discuss output cuts.
Riyadh has indicated it would be willing to consider a cut only if all major producers agreed to one, while Iraq and Iran have said they intend to boost their output this year.
Sechin said he expected Iran to ramp up oil production to between 5 million and 6 million bpd by 2025 from 3 million now as the country opens up after the lifting of sanctions.
Sechin also said U.S. shale production, another key driver behind the global glut, would decline in the long term.
"Shale oil production has its limitations in scope and time ... U.S. shale oil production will reach its peak in 2020," he said.
Sechin said however that onshore U.S. producers had proven more resilient to the oil price downturn.
"Shale oil markets reacted very quickly to the price shock as productivity rose dramatically, costs of production dropped and fracking became more efficient," Sechin said.