Russia blinks and wants to talk to Saudi Arabia and OPEC about coordinated oil production cuts

Russian officials have decided they should talk to Saudi Arabia and other OPEC countries about output cuts to bolster oil prices, the head of Russia’s pipeline monopoly said on Wednesday, remarks that helped spur a sharp rise in world prices.

Oil futures surged more than 5 percent after the comments by Nikolai Tokarev, head of oil pipeline monopoly Transneft, which gave the strongest hint yet of possible cooperation between the top non-OPEC oil producer and the cartel to try to reverse a record glut.

On its own, a production cut by OPEC would provide only marginal support to the oil price under the present market conditions, as would a cut by Russia alone. However, if the two sides cut together, such a move would cause substantial ripples in the oil market.

The only problem for both is that it would be the ultimate fool’s gambit. The move would support the price; but what it will also do is give a whole lot of non-OPEC producers, including and especially ultra efficient US shale players who have kept going even at $30 per barrel, some much needed breathing room.

If Russia and OPEC actually go down such an improbable route, then it would a victory for independent US upstarts on an epic scale.

U.S. shale player Continental Resources said weakness in the energy sector will manifest itself in a slow decline in overall production through 2016.

Continental said in a statement laying out its plans for the year that first quarter production will average around 215,000 barrels of oil equivalent per day and drop around 13 percent to 185,000 boe in the fourth quarter.