Russian oil firms plan to raise their oil production from April and they are comfortable with the current oil prices and even lower, oil executives said after meeting this week with Energy Minister Alexander Novak – a meeting which didn’t discuss the possibility that Russia may return to the OPEC+ production cut deal as earlier reports suggested.
Top executives from the major Russian companies, including Rosneft, Lukoil, Gazprom Neft, Tatneft, and Surgutneftegas, met with the minister on Thursday to discuss the companies’ plans and the market situation after the collapse of the OPEC+ deal last week.
Alexander Dyukov, chief executive at Gazprom’s oil arm, Gazprom Neft, told reporters that returning to the OPEC+ deal was not discussed at the meeting.
The coronavirus outbreak and concerns about recession would have sent oil prices to $35 a barrel anyway, even if OPEC and its Russia-led allies had reached a deal last week, Dyukov said.
Gazprom Neft is disappointed with the OPEC+ break-up, Dyukov said, but noted that OPEC is to blame for the ‘no deal’ outcome of the talks.
Gazprom Neft, Russia’s third-largest producer, could increase its production by between 40,000 bpd and 50,000 bpd in April, Dyukov said, as carried by TASS.
Gazprom Neft can work with $35 oil, the manager said, while Tatneft’s CEO Nail Maganov boasted that even $8 oil is not critical for the company, Russia’s Prime news agency reports.
Commenting on reports that Saudi Arabia is now preparing to flood the markets with its cheaper oil, including Russia’s key market Europe, Dyukov said that Gazprom Neft isn’t concerned that its oil would be pushed out because basically all its volumes have been contracted despite the current market conditions. Related: Yergin: No End In Sight For The Oil Price Crisis
Earlier this week, minister Novak said that Russia has the potential to ramp up its oil production by 500,000 bpd. On Friday, he told reporters that Russia would be able to restore by the end of April all the production cuts under the deal with OPEC, which would boost production by 200,000 bpd from current levels.
Commenting on the OPEC+ (semi)broken alliance, Novak said that Russia doesn’t see constructive conditions now to return to discussing the OPEC+ deal, days after saying that “the doors aren’t closed” to future cooperation with OPEC.
“We don’t see conditions to discuss the deal, you can all see how OPEC members behave,” Novak said.
OPEC members are flooding the oversupplied market with oil, going for Russia’s market share, and Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman told Reuters on Tuesday, commenting on possible OPEC+ meetings:
“I fail to see the wisdom for holding meetings in May-June that would only demonstrate our failure in attending to what we should have done in a crisis like this and taking the necessary measures.”
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
- Should You Sell Your Oil Stocks Now?
- The Great U.S. Shale Decline Has Already Begun
- The Real Oil Demand Shock Is Yet To Come
However, this was not the reason why Russia refused the OPEC+ cuts. Its decision was based on the fact that any such cuts would have been futile with no positive impact whatsoever on oil prices while the coronavirus is raging.
Still, Russian oil companies are planning to raise their oil production from April by an estimated 200,000-500,000 barrels a day (b/d) completely unconcerned by Saudi threats of price war and flooding the global oil market with oil. They are comfortable with current oil prices and even lower with one Russian oil company, Tatneft, boasting that even $8 oil is not critical for it.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London