Deputy energy minister: Russia expects to fulfill OPEC+ deal soon

MOSCOW, May 6 (PRIME) -- Russia expects to fulfill the new OPEC plus oil output reduction agreement fully very soon, Deputy Energy Minister Pavel Sorokin told fund Roscongress in an interview released on the website of the organization on Wednesday.

On April 12, the OPEC+ countries agreed to reduce their oil production by 9.7 million barrels per day in May–June, by 7.7 million barrels per day in July–December, and by 5.8 million barrels per day from January 2021 through April 2022. Russia’s share in the reduction will amount to 2.5 million barrels per day in May–June. The agreement is valid until April 30, 2022, but the members will revise its prolongation in December 2021.

The Russian Energy Ministry sees no risk of zero oil prices but some demand risks remain, Sorokin said. "The market in general understands that the situation has started to improve… The fact that the OPEC plus agreement will remove additional 10 million barrels (per day) from the market starting this month provides no reason for zero prices now. The risks remain, however, because various development scenarios for demand remain," Sorokin said.

He added that not all OPEC plus members are to meet the terms of the deal but hopes that they would do their best still.   

Operations of refineries and fuel stations in Europe signals an improvement of oil demand, the official said, adding that whereas the earlier demand decrease amounted to 50–70%, it narrowed to 40–60% and in some cases, demand rose by 15%.

The official said that the April oil price decrease has never been seen before. "This year we have found ourselves, I will say, in an unpreceded situation, I mean, demand fell by 30 million barrels per day during the peak in April. This meant a 30% oil, oil product demand decrease. And such situations have never been seen before, neither in the conditions of a pandemic, nor during the war, nor economic crises, I mean, this has never been seen before," Sorokin said.

The official said that growth of oil demand to 100 million barrels per day will take time.

According to Sorokin, low oil prices would purge the market from inefficient projects. "If we constantly hold prices above the fair level, which is about U.S. $50, we in fact trigger a big number of projects which must not be there on the market in the situation we are in. These are deep water projects, some projects in Africa and the U.S., in various geographies," Sorokin said.

The Russian ministry does not expect a significant recovery of oil production in the U.S. even if the prices return to $45–55, Sorokin said. The U.S. and Canada can cut output by a total of 2.8–4.0 million barrels per day, he said.

End %%mk/jst%%