Minister: Russia backs prolongation of oil output reduction deal

MOSCOW, May 10 (PRIME) -- Russia believes that a joint initiative of OPEC and non-OPEC countries to stabilize the world oil market efficient, and thinks that prolongation of the production cut deal beyond the end of 2017 will help bring the market to a normal state, Energy Minister Alexander Novak told reporters on May 8.

The OPEC states agreed to reduce production by 1.2 million barrels daily to 32.5 million barrels in November 2016. In December, 11 non-OPEC countries agreed to cut their combined output by 558,000 barrels, including Russia, which has agreed to slash production by 300,000 barrels daily compared with the level of October 2016. The agreement was concluded for January–June 2017 with potential prolongation, which is to be discussed in May.

“Russia associates itself with its partners in efforts to rebalance the market and thinks that the joint initiative to stabilize the oil market is currently efficient. We are discussing different options and think that prolongation for a longer period may speed up the return of the markets to a healthier condition,” Novak said.

Compliance with the agreement is good, and seasonal growth of demand should improve the impact of the deal significantly in the next few months, together with a 100% fulfillment of the agreement. “The process that began in March will gain momentum,” he said, adding that growth of shale oil production is compensated by higher demand and the cumulative slash of output by several countries.

Reuters reported citing Saudi Arabian Minister of Energy, Industry and Mineral Resources Khalid Al-Falih that OPEC and other participants of the agreement are likely to prolong the deal not just for the second half of 2017, but longer.

“Judging by consultations that I’ve had with participating members, I am confident the agreement will be extended into the second half of the year and possibly beyond,” Reuters cited al-Falih as saying.

“I believe the worst is now behind us with multiple leading indicators showing that supply-demand balances are in deficit and the market is moving towards rebalancing,” he said. The recent fall of oil prices happened due to a seasonal contraction of demand, idle time at refineries due to maintenance, and higher oil production in some non-OPEC states, including the U.S., he added.

He also said on his Twitter page that Brunei is ready to prolong the production reduction deal.

On May 6, Bloomberg reported citing Iranian Oil Minister Bijan Namdar Zangeneh that OPEC members want to prolong the production cut deal, and non-OPEC oil producers are likely to join the prolongation. Iran will support any OPEC decision, Zangeneh said, according to Bloomberg.

Reuters also reported citing OPEC and oil industry sources that participants of the agreement are discussing prolongation of for nine or even 12 months, and that Algeria is ready to support such a protracted prolongation as each U.S. dollar added to the oil price helps the country.

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