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Russia is not raising its crude oil production because it doesn’t make sense for Russian firms to boost output while the market is oversupplied, a Russian government official told Bloomberg on Wednesday, the day on which the OPEC+ pact expired and Saudi Arabia is gearing up to flood the market with oil.
While the Saudis have been pledging record oil exports over the next few months after the OPEC+ deal with Russia collapsed in early March, Russia has hinted that the current market situation with oil prices so low and the surplus so high wouldn’t make economic sense for its firms to boost oil production now.
Early in March, Russia’s Energy Minister Alexander Novak said that Russia could raise its oil production by 200,000 bpd to 300,000 bpd in the short term, with a potential for up to a total increase of 500,000 bpd.
But as oil prices continued to slide and demand continued to plunge, Russian companies signaled last week that boosting production might not be the wisest thing to do right now. Tatneft’s CEO, Nail Maganov, who boasted weeks ago that even $8 oil is not critical for the company, told reporters last week that it might not be economically feasible for Russian firms to boost production from April, due to the coronavirus pandemic.
The report of Russia putting the production boost on hold comes days after U.S. President Donald Trump and Russian President Vladimir Putin agreed on Monday to have energy officials from both countries discuss the dire state of the global oil market.
On Wednesday, U.S. Secretary of Energy Dan Brouillette and Russian minister Novak “had a productive discussion on the current volatility in global oil markets,” the U.S. Department of Energy said.
“Secretary Brouillette and Minister Novak discussed energy market developments and agreed to continue dialogue among major energy producers and consumers, including through the G20, to address this unprecedented period of disruption in the world economy,” DOE said.
President Trump, meanwhile, said at a news conference on Tuesday that he had phone conversations with Putin and with Saudi Arabia’s Crown Prince Mohammed bin Salman.
“We’re all going to get together and see what we can do because you’re going to lose an industry over it, thousands and thousands of jobs,” President Trump said.
“The two countries are discussing it, and I am joining at the appropriate time if need be,” President Trump added.
The Russian government official who spoke to Bloomberg on Wednesday said that Russia hasn’t held talks with the Saudis on the situation on the oil market yet.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.