MOSCOW: Saudi Arabia and Russia are close to a deal on oil output cuts to reduce a global glut, a top Russian negotiator said on Monday, while sources in Moscow said it was ready for significant cuts, ahead of talks planned for this week.

A supply deal between Opec, Russia and other producers, a group known as Opec+, that had propped up oil prices for three years collapsed in March, just as the impact of lockdowns to limit the spread of the new coronavirus destroyed demand.

Riyadh and Moscow blamed each other for the failure and launched a battle for market share, sending oil prices to their lowest in two decades. That has strained the budgets of oil-producing nations and hit higher-cost producers in the United States.

US President Donald Trump said last week he had brokered a deal with Moscow and Riyadh. But initial plans for an Opec+ meeting on Monday were delayed. Two Opec sources said a video conference would be held at 1400 GMT on Thursday.

“I think the whole market understands that this deal is important and it will bring lots of stability, so much important stability to the market, and we are very close,” Kirill Dmitriev, one of Moscow’s top oil negotiators, who also heads Russian’s sovereign wealth fund, told CNBC.

Dmitriev was the first to make a public declaration last month about the need for an enlarged supply pact, potentially involving producers outside the Opec+ group.

Two Russian sources said Moscow was ready for a significant oil output reduction provided other producers would do the same.

“It is necessary to reduce oil production in order to tackle the very serious decline in demand,” a source close to the Russian government told Reuters on condition of anonymity.

The Russian energy ministry did not respond immediately to a request for comment.

Kremlin spokesman Dmitry Peskov told reporters earlier on Monday that Moscow was ready to work with other leading oil exporting countries.

How deep would be enough?

Last week, Russian President Vladimir Putin said Opec+ cuts could amount to around 10 million barrels per day (bpd), or some 10 per cent of global output. Russian production reached 11.29 million bpd in March.

A Russian government and an industry source, speaking on condition of anonymity, said such 10pc cuts might not be enough to steady the global oil market given the weakness of demand.

Trump has said a deal could see cuts of 10pc to 15pc of global supply.

Russia and Saudi Arabia have long been frustrated that curbs by the Organisation of the Petroleum Exporting Countries (Opec) and others have left a gap that has been filled by shale oil firms in the United States, which became the world’s biggest producer.

Published in Dawn, April 7th, 2020