Agreement by Russia to reduce its oil production has contributed to stabilize oil prices

Agreement by Russia, last week, to accept the Organization of Petroleum Countries (OPEC) decision to reduce slightly its oil production, by between 1 and 2 percent, has contributed to stabilize oil prices at around $50 per barrel. As declared by Russia’s President Vladimir Putin, at an energy conference in Istanbul, Turkey, “freezing or even reducing oil production is the only way to save the stability of the energy sector.”

Also contributing to stability is the almost insatiable demand for oil in Asia. This explains why prices have stabilized, despite the return of Iran’s crude exports to world markets. Four giant consumers have recently increased their purchases of Iranian oil, to the point that it is estimated they have bought more than two thirds of the increase in exports from Iran, which intensified after the lift of economic sanctions approved as a result of the nuclear agreement.

For instance, China never stopped buying oil from Iran, but its purchases last August increased almost 50 percent, from the same month last year, to 749,000 barrels per day. The same in India, imports of Iranian oil tripled in August, from a year earlier, to 576,000 barrels per day, while Japanese and South Korean imports almost doubled during the same period.

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