Russia's Energy Minister Alexander Novak is discussing with oil firms on Tuesday the possible extension of the current oil production cuts beyond June, sources with knowledge of the meeting's agenda told Reuters.
The OPEC+ group pledged in April production restrictions of 9.7 million bpd in May and June, before easing the cuts to 7.7 million bpd for July through December.
As part of the OPEC+ deal, Russia pledged to cut its production to 8.5 million bpd in May and June from a February 2020 baseline, or by around 2 million bpd, or by 19 percent, from February 2020, Novak told Interfax in an interview last month.
The discussion of the possibility of extending the current level of cuts after June could be a sign that Russia is open to further support the rebalancing of the oil market after the price crash and coronavirus hit the economies of all oil-producing countries, including Russia.
Russia has said it would hold regular meetings with its oil firms to take stock of the deal's implementation, and today's meeting is part of those regular updates. Earlier today, sources told Russian news agency Interfax that minister Novak would discuss the OPEC+ cuts with the top managers of the local oil firms.
According to reports from last week, Russia is almost complying with its share of the cuts, with its crude oil production averaging 8.72 million bpd in the first three weeks of May, as per Reuters estimates. This is close to the 8.5-million-bpd quota, especially considering Russia's far-from-perfect track record in complying with the cuts.
Novak said on Monday that the market would rebalance by July, thanks to improving demand and quicker-than-expected production cuts from OPEC+ and from producers outside the pact.
The effect of the OPEC+ deal is undoubtedly positive, Vladimir Putin's Press Secretary Dmitry Peskov told Russian media on Tuesday, noting that largely thanks to the deal, the oil market avoided a much more negative scenario.
By Tsvetana Paraskova for Oilprice.com
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Comments
Like oil companies around the world, Russia’s oil-producing companies are also squeezed by the falling oil demand and and the need to cut total oil production in the country by 2 million barrels a day (mbd) as part of the OPEC+ deal. The oil majors in Russia are seeking concessions from the government to help them ride out the period of low oil prices with the least damage possible.
But such announcement goes beyond oil prices. It signifies that cooperation between Russia and Saudi-led OPEC and particularly between Saudi Arabia and Russia is back on track and that the oil price war is behind them.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London