Russia's Energy Minister Alexander Novak told CNBC the increase in U.S. shale oil production since the start of the OPEC/non-OPEC production cut was expected, adding that it would have been worse for OPEC and its partners if they hadn't agreed the extension they did yesterday.
Evidently irritated by a question he says he is being asked all the time, Novak said "This is not news for us. For some reason when people ask this question they seem to believe that we didn't think that shale oil would grow. Either you underestimate us or you think we lack professionalism. I think that if you think we are professional you need to understand that we are including all this in our calculations."
It would indeed be hard to believe that nobody in OPEC or Russia imagined that higher oil prices would motivate an increase in shale oil production. Since the start of the year, when the cuts came into effect, shale producers have raised their production every month, with the latest weekly EIA report calculating total crude oil production in the United States of 9.68 million bpd. Shale oil has contributed much of this increase.
Responding to questions about the doubts that dampened oil prices ahead of the meeting that Russia may not sign up for the extension, Novak said Russia would not have entered the deal if it wasn't beneficial for it. This comment, however, is in contrast with a recent warning from Economy Minister Maxim Oreshkin, who said the deal is hurting the Russian economy by discouraging oil companies from new investments in oil production.
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In any case, according to Novak, now that the extension has been agreed to, it may be time to start discussing the wind-down of the cuts - something that will have to take place eventually, he said. "It's clear that in any event, this process will not go on forever and that at some time it will all come to an end. Therefore, we need to prepare ourselves for this. Today, we understand that we need to see this process to its conclusion," the official said.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More