Russia will continue to comply with the OPEC oil production cut deal until the deadline set in the extension agreement last November and even into 2019 if need be, Russia’s Energy Minister Alexander Novak said.
Novak added, however, that Russia is also on board with an earlier end to the deal, should its partners decide it was the best course of action to follow.
In an interview with Bloomberg, the official also reiterated that the best approach to ending the deal would be a gradual withdrawal, which could begin in the second half of this year, so discussions of the exit strategy of the partners in the deal could take place at their meeting in June.
For the umpteenth time, Novak said he was not bothered by the growing shale oil production in the United States, or the increasingly likely possibility that the United States would become the largest oil producer in the world, overtaking Russia.
Novak’s remarks come amid growing doubts that OPEC will have the patience to see the deal through its original end in December this year. With U.S. production consistently rising and predictions that it will hit 11 million bpd before the year’s end, it must be hard for rival producers to see a growing portion of this production go into markets where they hold a significant share.
Yet some short-term analyses see a possibility that the oil market could slip into a deficit despite the growing U.S. production. Notably, the International Energy Agency said in its latest monthly report on oil that Venezuela’s production decline rate could accelerate this year and “without any compensatory change from other producers it is possible that the Latin American country could be the final element that tips the market decisively into deficit.”
This should be good news for OPEC and its partners in the deal, or maybe a mixed blessing as prices would certainly jump and boost U.S drillers’ motivation to continue expanding production. On the other hand, higher oil prices would help smooth out the exit strategy of the pact.
By Irina Slav for Oilprice.com
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