Novak: OPEC+ prolongs oil output cut by 9.7 mbd for July

MOSCOW, Jun 8 (PRIME) -- The participants of the OPEC+ oil production cut agreement have decided to prolong the reduction by 9.7 million barrels per day for July, as compared with an earlier planned cut by 7.7 million barrels per day for the month, Russian Energy Minister Alexander Novak told reporters following a meeting of the members on June 6.

“A decision was made today to prolong the May–June parameters of reduction by… 9.7 million barrels per day for another month, July, to strengthen the deal’s influence, to balance the market, and to reduce risks and uncertainty, which we still can see,” he said, adding that the decision is right.

All the parameters of the deal, including Mexico’s participation have remained unchanged, Novak also said, adding that all the members have confirmed their commitment to fulfil the agreement by 100%, and that the states underperforming in May have promised to introduce additional cuts in the next few months.

Novak said that the decision was linked to a significant global excess of crude reserves, despite a deficit of supply projected for the nearest future.

“It is important to understand that in that period – in March and April, and also in May, when we also saw a surplus on the market – the reserves were growing, the reserves of oil in storages. The figures are giant, 25 million barrels per day… The excess has increased to around a billion of barrels over the months,” he said.

“We will have to have a certain deficit on the market. We need to reach a deficit in order to spend the billion barrel reserves,” he added.

The minister also did not rule out that the timeframe of the OPEC+ deal may change in any way, and said that it is early to speak about the state of the market in two years.

“I think it is premature to speak about the state of the things in two years. The market is so unpredictable and volatile, it largely depends on the global economic situation. We already have a lengthy agreement. We used to strike deals for six months, nine months was the longest, but now it is for two years. This is a signal to the market that during two years we will monitor the situation and make joint decisions to balance the market,” he said.

Novak also said that Russia expects its compliance to the deal to amount to 100% in June, and, considering the new parameters of the deal, domestic oil and gas condensate production is expected at 510–520 million tonnes in 2020.

All Russian crude companies have supported prolongation of the OPEC+ deal parameters for July, it was a consolidated decision, the minister added.

The OPEC said in a statement following the meeting that the next scheduled meeting of its members will take place on November 30, and that the OPEC+ meeting will be held on December 1 in Vienna.

Saudi Arabia’s Energy Minister Abdulaziz bin Salman Al-Saud said that the OPEC+ monitoring committee will meet every month until the end of the year to watch the market situation.

In April, 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.

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