Russia has started to cut oil production in accordance with its agreement with OPEC to aid the group’s efforts to restore the international oil market to balance, said the spokesman for the Kremlin, Dmitry Peskov.
Peskov’s statement was quite general but was void of any figures. “Without question Russia is carrying out all the points of the agreement and all the obligations that it took upon itself,” he said.
Yesterday, media quoted Russian energy industry sources as saying 100,000 barrels have been taken out of daily production as per the country’s obligations under the agreement. The same sources told Reuters that the average daily production rate for the first week of 2017 stood at 11.1 million barrels of crude.
Russia undertook to remove 300,000 barrels from its November 2016 daily average, which was about 11.2 million barrels. The target reduction should be reached in April, with overall average daily oil output for 2017 projected by the Energy Ministry at between 11.01 and 11.07 million bpd.
At the end of the six-month period, during which the OPEC-non-OPEC deal will be in effect initially, Russia should produce no more than 10.947 million barrels, according to Energy Minister Alexander Novak. Related: Platts Sees OPEC Cuts Eliminating Oversupply By Q3
The minister also said last month the cut will be proportionately distributed among all Russian oil companies, and the oil companies set up a monitoring group to ensure that everyone shoulders their respective part of the not-too-heavy burden.
Nevertheless, energy analysts are wary of taking all these indications at face value, still expecting Russia – and not just Russia – to cheat, especially if the desired effects of the cut, such as a more substantial price increase, do not materialize. Iraq is another party to the agreement that many expect to go rogue soon because of its dependence on oil revenues.
Meanwhile, Saudi Arabia has said it has reduced its own daily output by 486,000 bpd since the start of the new year, now pumping about 10.058 million barrels daily, according to an unnamed source quoted by Reuters.
By Irina Slav for Oilprice.com
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