Russia, Venezuela to discuss oil glut

Russia is one of Saudi Arabia's biggest oil market competitors, but both countries appear to be edging closer to holding talks about the glut [Xinhua]

Russia is one of Saudi Arabia’s biggest oil market competitors, but both countries appear to be edging closer to holding talks about the glut [Xinhua]

Russia and Venezuela will discuss strategies to deal with falling oil prices, the Kremlin said on Monday, as global markets continued to reel from last week’s drastic drop in Chinese stocks.

But the decline appeared to slow in some indices.

Europe’s FTSEurofirst 300 closed down 0.2 per cent while US stocks opened in negative direction although they appeared to regain traction when markets closed on Friday.

Weakened trading comes as fears continue that China may not be able to immediately pull out of its slump.

There was one upward momentum, however, as oil prices appeared to be buoyed by reports that US production will decrease in the first half of 2016.

US crude jumped by over 8 per cent and rose above $49 on Monday, erasing August’s losses. Brent also rose by more than 7 per cent on Monday to reach above $53 a barrel.

The rise in oil prices comes as the OPEC cartel expresses concern about oil price volatility.

“Today’s continuing pressure on prices, brought about by higher crude production, coupled with market speculation, remains a cause for concern for OPEC and its members—indeed for all stakeholders in the industry,” revealed a statement made in the OPEC Bulletin news publication on Monday.

It added that OPEC was looking to discuss the year-on-year drastic drop in oil prices with other producers.

This likely comes as welcome news for major oil producers Russia and Venezuela who have been more adversely affected by low prices than most.

Russia, which is struggling under US and European sanctions because of the Ukraine crisis, has seen oil prices drop at the worst time possible.

Its ruble has fallen by 100 per cent year on year and the economy is contracting by more than 3 per cent in 2015, analysts say. Russian oil companies have registered multi-billion dollar losses this year.

Venezuela’s economy, 95 per cent of which relies on oil exports, has fared far worse as the cash-strapped government finds itself unable to import many basic items such as milk, sugar, toilet paper and some medicines.

Kremlin official Yuri Ushakov said Russian President Vladimir Putin and Venezuelan President Nicolas Maduro would meet on the sidelines of their participation in this week’s China World War II Victory celebrations to discuss ways to offset economic losses due to the oil glut.

Ushakov said that both countries would take steps to stabilize oil markets. Saudi Arabia had previously said it would not discuss oil prices with other exporters until its main market rival Russia was willing to cut production.

On Monday, both countries appeared to edge closer to talking about the crisis. Ushakov said that any steps taken to stabilize oil prices could come in conjunction with OPEC.

The BRICS POST with inputs from Agencies

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