Russia to unveil oil export cuts in new OPEC+ deal next week: Novak

Russia has agreed on further curbs to its oil exports with OPEC+ partners and full details of the deal will be announced next week, Deputy Prime Minister Alexender Novak was quoted by Russian media as saying Aug. 31.

Responding to a question from President Vladimir Putin on whether agreement had been reached with OPEC+ partners on limiting exports, Novak said: “Yes, we agreed. But we will announce the basic parameters next week, publicly,” Interfax and other Russian outlets reported.

However, the announcement has raised questions amongst some OPEC+ delegates. One official who declined to be identified told S&P Global Commodity Insights he was unaware of any new deal, adding that any adjustment would require a formal meeting to be convened. The next meeting of the OPEC+ Joint Ministerial Monitoring Committee — which scrutinizes market management measures — is scheduled for Oct. 4.

Russia has been curbing its crude exports as part of efforts by the OPEC+ group to support prices in the face of global economic weakness in recent months. The country is set to taper its export reduction to 300,000 b/d in September from 500,000 b/d in August. Novak, who has overseen Russian coordination with OPEC+, previously said an extension of the curbs into October was being considered.

The suggested Russian export cut comes alongside a 1 million b/d production cut by OPEC+ partner Saudi Arabia, that is also due to expire at the end of September. The kingdom has yet to announce its intentions for October, and Saudi officials did not immediately respond to queries. The Saudi cuts have put a cap on its crude production at 9 million b/d — the lowest level in more than two years.

The existing Saudi and Russian measures come on top of some 1.2 million b/d in collective OPEC+ voluntary output reductions that have been in force since May.

Russia’s introduction of specific export constraints for its oil, rather than relying on production cuts to influence the market, has been a hallmark initiative of the Kremlin in recent months within the OPEC+ group. It reflects the size of Russia’s domestic oil market, one of the largest among the OPEC+ countries, and one that has seen internal supply difficulties in recent months.

Officials have not specified from which baseline level the export cuts are being made, although they refer to May-June levels.

The value of targeting export levels has been demonstrated by the current market situation, Novak said in separate comments Aug. 30, referring to oil prices that have hovered around $85/b for the last month.

Dated Brent, the North Sea benchmark used around the world and published by Platts, jumped from well below $80/b in early July to average $86.2/b over Aug. 1-Aug. 29. Platts is part of S&P Global Commodity Insights.
Source: Platts