Russia, OPEC Members to Discuss Easing Oil Output Cap
Russian oil minister says country sees eye-to-eye with Saudi Arabia on oil policy
Russia and other large oil producers will discuss relaxing an agreement that has cut oil output and helped support crude prices at a meeting next month, the country’s oil minister said Thursday.
Alexander Novak said he would discuss with counterparts from Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries the possibility of a “gradual output recovery,” according to RIA, a Russian state news agency. The talks will take place during a scheduled OPEC meeting in Vienna.
Mr. Novak said Moscow and Riyadh continued to see eye-to-eye in terms of oil policy, and are acting with a “common approach” to any further agreement to limit supplies.
Saudi Arabia and Russia orchestrated a deal in 2016 to rein in production from the world’s biggest pumpers of crude, including members of OPEC, a cartel of some of the world’s biggest producers. That deal effectively cut production by about 2% compared with levels at the time, and has helped reduce a large surplus of stored crude around the world and lift prices from their deep, long trough of recent years.
More recently, as international crude prices have risen to around $80 a barrel, pressure has mounted for the group to open up the spigot again.
U.S. President Donald Trump has said prices are too high, while analysts have warned that supply outages in Venezuela, as well an expected reduction in exports from Iran because of new U.S. sanctions, could tighten markets dramatically, leading to an acceleration in rising crude prices.
Russia, Saudi Arabia, other OPEC members and a handful of other big producers are currently cutting their collective output by about 700,000 barrels a day more than necessary to comply with the 2% cap. That has market participants expecting at least some loosening by the pact’s partners. Saudi Arabia has said it is monitoring markets closely and was ready to step in and boost output quickly if necessary to stabilize markets.
In Russia, too, there has been internal pressure to ease the output cap. Russian producers have poured billions of dollars of new investment into their oil fields. In recent months, they have pressured Moscow to allow them to produce more oil, to capture returns on that investment during a time of higher prices.
Gulf OPEC members, mainly Saudi Arabia and the United Arab Emirates, have been talking with other producers including Russia about the possibility of easing the cut at the OPEC meeting in June, according to people familiar with the matter.
“We are currently in talks with other producers to see if this is something that we should discuss and decide on in Vienna. We don’t like volatility and we don’t want to hurt demand,” said a senior Saudi official.