Russia will oppose any attempts to deepen the oil production cuts currently in effect in OPEC and 11 other oil producers, according to four government officials who spoke to Bloomberg. One of the sources said that deepening the cuts would be unwise, giving the impression that OPEC and its partners in the deal are uncertain about its effectiveness in reducing global supplies.
In other words, a deeper cut might pressure prices further instead of supporting them.
Another of the sources, which spoke on condition of anonymity, said that Russia is also against any further extension of the deal because such an extension will only make oil markets more volatile after it expires, when everyone returns to their normal output rates.
Russia agreed to shave off 300,000 bpd from its record-high output of 11.2 million barrels, which it reached in October 2016—the month that OPEC and its partners in the deal took as basis for the cuts. The partners are meeting later this month in St. Petersburg to discuss how the agreement is going and how global supplies are being affected by the cut.
Oil prices recently experienced a rebound from multi-month lows caused by doubts about how much the OPEC cuts are doing for global oil supply in the face of rising U.S. shale output and inventories, but the latest from the Energy Information Administration sparked some hope that the situation is no longer so bad: production and new drilling fell slightly. Related: Total OPEC Crude Oil Exports Drop In June
But benchmarks began another slide on Wednesday (WTI -3.31%; Brent -2.74% at 9:25am CST), and have been below US$50 a barrel for a couple of weeks now—far from the US$60 OPEC was aiming for with the initial deal and the extension. Deeper cuts could help prices, but the question remains: how many of the parties to the deal could afford deeper production cuts?
Meanwhile, Libya’s oil output has reached the highest in four years – at over 1 million bpd production is complicating OPEC’s efforts to push prices higher.
By Irina Slav for Oilprice.com
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