Russia could possibly exit OPEC production cut agreement

OPEC production cut agreement

By Energía16

15/01/2018

The OPEC production cut agreement could be left without Russian support as of next week.

According to this nation’s energy minister Alexander Novak, the country will discuss exiting the deal on January 21.

Russia had pledged to reduce production by 300,000 barrels per day.

However, Russian oil companies have complained regarding the pact.

This could be one of the reasons leading to this decision.

These oil companies argued the agreement is creating obstacles in the way to the industry’s expansion.

Novak stated that the current oil price level was short term.

The OPEC production cut agreement is balancing the market

Russia has assured that the OPEC production cut agreement is balancing the market.

However, it has not fully managed to do so, and thus it is necessary to continuously overview its progress.

Russia and Saudi Arabia are leading a joint effort to curb production and boost prices.

Brent LCOc1 crude has increased by 50 percent since mid-2017, standing at $70 per barrel this week for the first time since December 2014.

“I don’t think anyone is going to stop us from discussing these issues, and we will be able to discuss them in terms of the mechanisms which can be considered,” Novak said.

So far, Russia intends to abandon the pact if crude prices maintain at $70 per barrel for over six months.

Nonetheless, the minister said that not all oil surplus had been eliminated from the market.

Since late 2016, the main oil baskets recovered by 20 percent after the Organization of Petroleum Exporting Countries and 11 non-member nations agreed to reduce production by nearly 1.8 million barrels per day.

This pact has contributed to fight the oil glut and boost prices above the $50 mark, much higher than the $30 prices recorded during the first quarter of 2017, hitting 14-year-lows.

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