Russian Foreign Minister Sergei Lavrov speaks during a joint press conference with his Emirati counterpart following a meeting on February 2, 2016 at the ministry of Foreign Affairs in the capital Abu Dhabi. Image Credit: AFP

Abu Dhabi: An agreement between Russia and Opec (Organisation of the Petroleum Exporting Countries) on reducing oil production looks unlikely despite positive overtures from Russia’s Foreign Minister in Abu Dhabi yesterday.

According to analysts, reaching any agreement between Opec and non-members could be very challenging and difficult.

“I remain sceptical on solid action in terms of any agreement on reduced production. There won’t be any change on that at that moment,” said Edward Bell, a commodity analyst at Emirates NBD told Gulf News over phone.

It would also not be easy for both Opec and non-Opec countries to come to an agreement on how any production cuts would be distributed.

“I am not sure what the impact would be as you would be giving up market share in the global oil markets. Will they be ready to that? I don’t think so,” he said.

“United States oil and gas producers are now allowed to export crude for the first time in forty years. It does not make any sense to cut production and abandon the market share to the competitors you are in battle against.”

Russian Foreign Minister Sergei Lavrov said in Abu Dhabi that his country is open to further cooperation in the oil market with Opec and non-Opec countries and hold a meeting if everyone desires. He made these remarks while addressing a joint press conference with the UAE’s Foreign Minister Abdullah Bin Zayed Al Nahyan on Tuesday.

Oil prices gained this week amid Russia, Opec meeting speculation. Russian Energy Minister Alexander Novak said that Venezuela proposed a meeting next month but nothing is scheduled.

Brent, the global benchmark was trading at around $33 per barrel on Tuesday compared with $115 per barrel in June 2014. World Bank forecast an oil price of $37 per barrel for 2016.

Ole Hansen, Head of Commodity Strategy at Saxo Bank, said the Russian Foreign Minister’s visit to Abu Dhabi is expected to yield more talks on joint-cooperation, but since there was listen action following last week’s statement, markets will probably not react.

“We saw a clear sign recently when oil broke below $30 that a pain threshold had been reached as it helped trigger verbal intervention from oil executives and government officials both in Russia and within Opec. The fact that they then later stepped away from any concrete initiatives returned the market focus straight back to the current long line of negative fundamentals.”

Like many countries in the Gulf region, Russia is highly dependent on oil revenues. According to US Energy Information Administration, oil and natural gas revenues account for more than 50% of the federal budget revenues.