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Russia yet to finalise stance before OPEC+ considers deeper oil cuts

Russia’s energy minister said on Tuesday Moscow had not decided on its position before a meeting of OPEC oil producers and their allies that is expected to discuss additional curbs to output, although he said he expected talks to be constructive.

The Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+ that meets on Thursday and Friday, already has a deal that runs to March to cut 1.2 million barrels per day (bpd), or about 1.2% of global demand.

Two sources told Reuters that OPEC+, which will discuss policy beyond March at the Vienna meeting, was now considering deepening the cuts by at least 400,000 bpd more.

OPEC lynchpin Saudi Arabia was lobbying for the extra cuts to secure high oil prices that would help it balance its budget and support Thursday’s pricing for the initial public offering in its state-owned oil giant Saudi Aramco, they said.

Russia, the world’s second biggest oil exporter behind Saudi Arabia, has so far opposed deeper cuts or extending the supply cutting pact, although Moscow has typically taken a tough stance before every meeting before approving the policy.

“I will not tell you anything now as we are still finalising our position,” Russian Energy Minister Alexander Novak said when asked about Moscow’s stance before the talks.

“Let’s wait … But I think the meeting, as usual, will be of constructive nature,” he told reporters in Russia’s capital.

The report on Monday that OPEC+ was considering deeper cuts helped lift oil prices. Benchmark Brent was trading near $61 a barrel on Tuesday.

Goldman Sachs said OPEC and its allies were likely to extend output curbs through June, but said an extra three months of cuts would provide little support to prices, which it expected to continue trading around $60 in 2020.

Other sources said on Monday that the latest OPEC analysis, drawn up by OPEC’s Economic Commission Board (ECB), showed a large oversupply and build up in inventories in the first half of 2020, if no additional cuts were made.

Russia has agreed to reduce output by 228,000 bpd to about 11.18 million bpd in 2019 under the existing OPEC+ deal, although it pumped 11.244 million bpd in November.

Novak said Russia’s average cut was 195,000 bpd in November but he said Moscow aimed to comply with its quota in December.

Russia earlier called for a change to the way its output is measured to exclude gas condensate, which accounts for about 7%-8% of Russia’s total oil production, or about 800,000 bpd.

Novak told reporters he planned to discuss excluding condensate from Moscow’s quotas at the OPEC+ meeting.

By excluding condensate and only taking into account oil production, Novak said Russia’s output could be about 225,000 bpd to 230,000 bpd less in December.

“That said, we will discuss with our colleagues to take into account our statistics the same way as for OPEC countries – excluding condensate,” the minister said.

Vagit Alekperov, chief executive of Russia’s No.2 oil producer Lukoil, said in comments broadcast on Tuesday that it would not be expedient to deepen global oil production cuts in the winter season, especially for Russia.

Russian data gives production in tonnes. Reuters uses a conversion rate of 7.33 barrels per tonne of oil to convert those figures to barrels per day.
Source: Reuters (Reporting by Anastasia Lyrchikova, Maria Kiselyova and Vladimir Soldatkin; Writing by Katya Golubkova and Ahmad Ghaddar; Editing by Edmund Blair)

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