Russia is still reviewing the recommendation of the OPEC+ technical panel for additional cuts of 600,000 bpd in response to the slump in oil demand over the coronavirus outbreak, Russian Energy Minister Alexander Novak said on Tuesday, as Moscow continues to avoid a direct comment on last week's proposal that the OPEC+ coalition deepen the production cuts.
Last week, the technical panel of the OPEC+ group recommended extending the oil production cuts agreed last December to the end of 2020, the current president of OPEC, Algeria's oil minister, said on Sunday. The panel also recommended deeper cuts-of 600,000 bpd-to last until the end of Q2.
Russia, however, has asked for time to review the proposal at home and as of Tuesday, it was still studying it.
"Russia is following closely the impact of the coronavirus outbreak on the global energy markets. The situation remains highly uncertain," Novak said today, as carried by Russia's news agency TASS.
Russia is now carefully studying the recommendation of the technical committee in order to assess the situation on the market and take a balanced approach based on the interest of the market as a whole, the Russian energy minister added, not revealing too much about Russia's position on the proposal to deepen the production cuts.
Representatives of Russian oil companies will meet with Novak on Wednesday, February 12, to discuss the OPEC+ deal, two sources with knowledge of the plan for the meeting told TASS on Tuesday.
Russian companies have discussed the OPEC+ production cuts with Novak ahead of previous OPEC+ meetings and decisions. Oil firms in Russia have long balked at continued production cuts, arguing that the cuts hinder their production expansion plans, while giving more market share to U.S. shale.
The OPEC+ technical panel will meet again before the ministerial meeting of OPEC and its Russia-led allies currently set for March 5-6, OPEC sources told TASS on Tuesday. At the panel meeting, Russia is expected to tell its partners its position on whether deeper cuts are necessary in Q2 to mitigate the impact of the coronavirus on oil demand.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More
Comments
Equally any attempt by OPEC to increase output will prove a real disaster as Saudi Arabia’s discredited policy of flooding the global oil market in the aftermath of the 2014 oil price collapse.
Even if OPEC’s production plunges by 2.0 million barrels a day (mbd) on top of Libya’s virtual loss of its production amounting to 1.0 mbd, this will not stop the continued decline in global oil demand and prices as long as the coronavirus outbreak is still raging. This is not due to lack of global demand but to physical inability of China to import and receive crude oil while it is in quarantine.
Once the outbreak is contained, the global oil market will rectify itself quickly with China’s crude oil imports and prices recouping their recent losses.
There is another major reason why Russia is hesitant about new production cuts. Russian oil companies have long balked at continued production cuts, arguing that the cuts hinder their production expansion plans while leading to a wasteful loss of market share.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London