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Still too early to take position on OPEC+ crude deal for H2: Russia’s Novak

Russian energy minister Alexander Novak said Monday it was still too early to talk about what form an OPEC+ deal on crude output should take in the second half of the year due to ongoing uncertainty in the market.

“We should wait, including for meetings during the G20,” he told reporters on the sidelines of the World Petroleum Council’s Future Leaders Forum.

“We will see what issues will be discussed there, how the economy and the market situation will develop. We will have a clearer idea of the situation by the OPEC/non-OPEC meeting,” Novak said.

In recent years, Russia has been reluctant to commit to a firm position until the eve of meetings between ministers from OPEC and non-OPEC oil-producing companies, calling for analysis of as much data as possible before taking decisions.

The OPEC+ group is set to meet in a week’s time, with G20 meetings that will include Russian and Saudi leaders and energy ministers slated for Friday and Saturday.

Novak said the hardest factors to predict were oil consumption in the third and fourth quarters, demand, “and the impact of sanctions policy on the global market needs to be better understood”.

Earlier Monday he said investment in research and innovation was becoming more crucial at a time when competition for global energy markets and the use of non-market methods to fight for market share is increasing.

“We see increasing competition for global energy markets. At the same time we are dealing with wider and wider use of non-economic methods of fighting for customers,” Novak said during the forum.

“Aside from this, the technological revolution is increasing the role of innovative processes, and benefits those who invest in research. In a world of tougher competition every dollar of cost reduction counts,” he said.

Novak said the ministry continued to discuss possible options for production in H2 with domestic producers.

Last Thursday, Vagit Alekperov, CEO of Lukoil, Russia’s second-biggest crude producer, said Russian producers did not have a uniform view on the best approach to take.

The current output agreement is set to expire on Sunday. Other ministers from participating countries have indicated their support for a rollover of the agreement into the second half of the year.

Azeri, Kazakh support

Energy ministers from Azerbaijan and Kazakhstan also took part in the conference on Monday and indicated that they supported an extension.

Kazakh energy minister Kanat Bozumbayev said he was not worried about the country meeting its commitments if the deal is extended.

“We will comply. We will manage,” he said.

Kazakhstan committed to cut 40,000 b/d of production from November 2018 levels of 1.9 million b/d. It has struggled to meet that target, as well as previous targets, due to the ramping-up of its giant Kashagan field.

Kazakhstan produced a total of 36.50 million mt of crude and condensate in the first five months of the year, equivalent to around 1.77 million b/d. It achieved that primarily by carrying out maintenance in April and May at Kashagan.

Azeri officials have also indicated they would support an extension to the deal.

Under the latest iteration of the agreement, in force for the first six months of 2019, Azerbaijan agreed to cut 20,000 b/d from its September 2018 output of 796,000 b/d. The ministry said previously that average output in the first five months of the year was 771,200 b/d.

Azeri energy minister Parviz Shahbazov also said: “A global oil price of $60-70/b is the optimal for the majority of countries, including both producers and consumers.”
Source: Platts

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