The top executives of Russia’s oil companies discussed on Monday the future of the OPEC+ deal with Russian Energy Minister Alexander Novak, including an option to extend the cuts as-is for three months until March 2021, instead of easing the cuts from January as planned, sources with knowledge of the matter told Russian news agency Interfax.
The OPEC+ group, in which Russia is the leader of the non-OPEC producers, currently plans to taper the 7.7-million-bpd collective cut by 2 million bpd beginning in January 2021. But the second coronavirus wave sweeping across the United States and Europe—and already prompting the return of lockdowns in major European economies—is further delaying the global oil demand recovery. In recent weeks, concerns about demand and rising supply from Libya have weighed on oil prices and intensified market speculation that the OPEC+ group may not have a choice but to roll over the current cuts and delay the plans to ease those cuts in January.
Russian oil firms have openly criticized at times the OPEC+ deal in the past because, they argue, it burdens them with production cuts aimed at supporting oil prices, which in turn help U.S. producers to pump more oil.
At the meeting with minister Novak on Monday, the companies discussed several options, as usual in those meetings, Interfax’s sources said. The Russian companies supported the baseline option discussed at the meeting—keeping the terms of the OPEC+ deal as they are now, which means the group relaxing the cuts by 2 million bpd from January 2021, one of Interfax’s sources said.
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Russian oil firms are against the idea aired recently by some partners in the deal that OPEC+ should even deepen the current cuts in the first quarter next year. Russia’s oil companies are not ready and willing to deepen the cuts; the maximum they could agree to would be extending the current production cuts through the first quarter of 2021, a source told Interfax.
Russia’s oil firms, however, will not have a final say in Moscow’s options in the OPEC+ deal, as the ideas discussed today will also be discussed at a higher level. Russian President Vladimir Putin will likely have the final say.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com