Saudi Arabia Denies a Proposed 5% Production Cut With Russia; No OPEC Meeting Planned

Alexander Novak, energy minister to Russia, said Saudi Arabia had proposed each country reduce oil output by 5 percent

Just a day after Russia made headlines by stating it was willing to negotiate with Saudi Arabia in the hopes each country would cut oil production by 5 percent, Organization of the Petroleum Exporting Countries (OPEC) delegates claim no such negotiations are planned, according to reports.

Four unnamed delegates told reporters they hadn't heard of Russia's plans, and one Gulf member said Saudi Arabia has no proposal to reduce output.

Nikolai Tokarev, head of Russia's oil pipeline monopoly Transneft, earlier said his nation's oil executives and government officials in a January 26 meeting in Moscow agreed to take steps to rebalance the global oil market, "including negotiations within the framework of OPEC as a whole, and bilaterally"; he added that "the main initiative is being shown by, of course, our Saudi partners; they are the main negotiators."

This coincided with a report that Alexander Novak, energy minister to Russia, said Saudi Arabia had proposed each country reduce oil output by 5 percent.

Edward Morse, global head of commodities research at Citigroup, noted that "It's another part of a stream of news that comes out of Russia and there's no indication that the Saudis have any desire to do anything."

Chris Weafer, senior partner at Macro-Advisory in Moscow, added that US shale producers are the real target of the Saudis and that "I can't see Russia or Saudi cutting their own production to help the shale industry."

However, other observers point out that Russia's initial claims and the predictable OPEC response demonstrates that the economic situation is becoming desperate for non-OPEC and OPEC producing countries:  "When they really have their back against the wall is when a deal gets made," said Daniel Yergin, vice chairman for IHS, adding that the key is how much more the market will be impacted with Iran ramping up exports.

Russia has waffled on the matter of stabilizing the crude oil market: in November, Novak and Igor Sechin, head of Rosneft, both said a meeting was possible in mid-December between OPEC and non-OPEC producers, but one month later a Russian energy ministry spokeswoman said no meeting was expected.