Russia says ready for ‘flexible’ oil output ceiling in OPEC deal in June
Russia appears ready for the production ceiling under the OPEC/non-OPEC coalition deal to be revised in late June as the market has been stabilized and oil prices have hit their highest since November 2014 in recent days.
“We will definitely discuss the issue [of potential flexibility in response to concerns about Venezuelan and Iranian output] at the ministerial meeting in June,” Russian energy minister Alexander Novak told reporters Thursday on the sidelines of the St Petersburg International Economic Forum.
“We have all the tools to react quickly and take any decisions,” he said, reacting to concerns about the coalition’s ability to offset the potential fall in output, given that Saudi Arabia, Kuwait, UAE, Iraq and Russia appear to be the key countries with the firepower to boost supply.
Venezuela’s production continues to plunge as its economy goes into a tailspin, with sources expecting another 200,000 b/d drop in the coming months, while analysts estimate that Iran could lose up to 500,000 b/d immediately if sanctions are re-imposed from November 5.
The comments came as Novak prepares to meet his key counterpart in the OPEC/non-OPEC agreement, Saudi Arabia’s Khalid al-Falih, at the St Petersburg International Economic Forum Friday.
The CEO of Russia’s second-largest oil producer, Lukoil, Vagit Alekperov, also spoke in favor of reconsidering the production limits due to already high oil prices, while supporting the extension of the basic framework well beyond 2018.
Lukoil believes the deal should be continued, including through 2019 and 2020, as it has proved its efficiency “but the production limits should be flexible,” Alekperov said.
“The agreement has balanced the market, has made it more predictable so we need to act more flexibly, based on the market situation,” he told reporters on the sidelines of the forum. Falih, OPEC President and UAE Oil Minister Suhail al-Mazrouei and OPEC General Secretary Muhammad Barkindo are to attend the forum and discuss these issues with Novak, just a month ahead of a ministerial meeting in Vienna of the OPEC/non-OPEC coalition in late June.
Mazrouei told S&P Global Platts last month that OPEC was working on a “flexible and dynamic” proposal and it now appears the ministers are weighing up changing the terms of the 1.8 million b/d output cut deal.
“I hope that the June 21-22 meeting will come to some decision,” Alekperov said.
He added the coalition should start increasing production as oil prices of around $80/b are “already high.”
Alekperov said he expected the Russian ministry to discuss the issue with national oil companies before the Vienna meeting but pledged that his company would comply with any decision taken by the ministry.