Russia has cut crude oil production by 200,000 barrels daily, Energy Minister Alexander Novak said. That’s two-thirds of the amount it agreed to cut under the OPEC-non-OPEC agreement closed at the end of last year.
The 300,000-bpd reduction that Russia agreed to represents 2.7 percent of its October output, which exceeded 11 million bpd. This went up to 11.23 million bpd in November – the month that was taken as the basis, from which individual cut quotas were assigned.
The country, which was the largest non-OPEC producer that signed up for the cut agreement, said it would reduce production gradually, raising suspicions about whether it will try to find a way around it. Still, the amount is small compared to its total daily output, and the cut will be helped by the start of maintenance season.
Together, OPEC and the 11 non-OPEC producers that signed up for the cut were supposed to take off 1.8 million barrels from the global daily average supply. Despite high compliance rates, especially among OPEC members, the cuts have failed to raise prices in any substantial way, and now some OPEC members are talking about an extension of the agreement beyond the June 30 deadline. Related: Maduro’s Last Stand: Military Takes Over Struggling Oil Sector
The main reason for the extension is rising U.S. shale production, which last week hit 9.13 million barrels daily. The Energy Information Administration expects this to climb further to 9.73 million bpd in 2018.
Considering U.S. production and current inventories of crude, even a compliance rate of 100 percent among OPEC members will not drive prices high enough, with or without an extension. Not everyone is on board with such a move. Saudi Arabia, for one, said it will only agree to an extension if global inventories continue to exceed the five-year average. Russia said it needed more production and inventory data before it considered signing up for another six months of cuts.
By Irina Slav for Oilprice.com
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