While the oil market is increasingly questioning if OPEC/non-OPEC’s production cuts have any effect, Russia’s Energy Minister Alexander Novak weighed in on Thursday, saying that the production cut pact was working to reduce global oversupply and price volatility, and there was no need to take immediate additional moves to lift the price of oil.
“We believe that it is necessary to move within the framework of the agreed decisions and that new, snap decisions are not necessary,” Novak told Reuters in an interview published on Thursday.
“I think that the decisions that were taken, they were the right ones,” according to the Russian minister. Any new moves to prop up oil prices would create more “chaos” in the market, Novak told Reuters.
The minister was echoing the words of four Russian government officials who told Bloomberg on Wednesday that Russia would oppose any attempts to deepen the oil production cuts currently in effect in OPEC and 11 other oil producers. 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.
While Novak was giving his opinion, he told Reuters “I can’t predict what the proposals could be from [other] ministers” when the Joint OPEC-Non-OPEC Ministerial Monitoring Committee (JMMC) gathers for its next meeting in St. Petersburg, Russia, on July 24.
Some analysts have suggested that oil prices could plunge to US$30 a barrel in 2018 and maintain that low price for some two years, should OPEC fail to make steeper output cuts.
Although Iran’s Oil Minister Bijan Zanganeh was quoted as saying last month that OPEC producers were holding discussions on potentially deepening the cuts, OPEC delegates and sources told Reuters last week that the cartel would not be hurrying to make steeper cuts.
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Referring to OPEC’s—and its partners’—exit from the cuts deal after March 2018, Russia’s Novak told Reuters today that “we are not going - as we discussed with our colleagues - to all hike oil production on April 1 at once.” By then inventories would have dropped to their normal levels and oil demand would be picking up in the second quarter next year, according to Novak.
The Russian minister believes that there is room for oil prices to rise from the current levels, and that the “fair” value is between US$50 and US$60 per barrel. At 9:07am EDT on Thursday, WTI Crude was trading up 1.51 percent at US$45.81, while Brent Crude was up 1.42 percent at US$48.47.
By Tsvetana Paraskova for Oilprice.com
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