UPDATE: OPEC+ approves oil output cut by 500,000 bpd for Jan–Mar 2020

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VIENNA, Dec 6 (PRIME) -- The OPEC+ states have agreed to further reduce oil production by 500,000 barrels per day in January–March 2020, Russian Energy Minister Alexander Novak said on Friday.

“OPEC and non-OPEC states have decided to reduce production by an additional 500,000 barrels per day from January 1, 2020 until the agreement expires, or for the first quarter… it will be effective to reduce production during a fall in demand in the first quarter to balance the market, with the quota to be distributed among all the participants,” he said.

Novak also said that Russia’s production cut will increase to 300,000 barrels per day in the period.

“As to Russia, of the total reduction volume it will cover 70,000 barrels per day, so our quota will amount to 300,000 barrels per day for the first quarter,” he said.

The OPEC+ states have approved the output calculation method excluding gas condensate, according to the OPEC methodology, the minister also said.

“As to gas condensate, you know that OPEC states… exclude condensate from calculation of the output. When non-OPEC states agreed in 2016, it was proposed to calculate the output including condensate. Now, after an analysis, we have concluded that the method should be altered and it would be more effective and efficient to calculate production without condensate,” Novak added.

“It will not change the quotas. Russia has a quota of 228,000 barrels per day, it will remain unchanged, as to oil production.”

The minister also said that Russia sees its output target under the OPEC+ deal, excluding gas condensate, at 10.398 million barrels per day as of the end of 2019, as compared with 11.421 million barrels per day in October 2018.

A source familiar with the decision told PRIME that OPEC states will reduce production by 372,000 barrels per day, and non-OPEC states by 131,000 barrels per day.

Novak also said that OPEC+ does not see shale oil as a challenge.

“As to shale oil, we see no problem with it within the framework of implementation of the deal. Of course, we monitor production all over the world… appraise global supply and demand. But we can see that there are difficulties with production of shale oil… many experts see a fall in (the U.S.’) production rate,” he said.

Saudi Arabia’s Energy Minister Abdulaziz bin Salman Al-Saud told reporters that the overall oil production cut of OPEC+ states, including Saudi Arabia’s voluntary contribution of 400,000 barrels per day, will amount to 2.1 million barrels per day.

“(OPEC+ will reduce production by) 1.7 million barrels per day, which is 1.2 million barrels per day (envisaged by the previous agreement) plus the new cut of 500,000 barrels per day… (Saudi Arabia) will add the voluntary reduction of 400,000 barrels per day, which will increase the entire output cut, agreed by 24 countries, to 2.1 million barrels per day.”

Al-Saud added that his state will overfulfill the plan only if all the participants adhere to the deal strictly.

In November 2016, OPEC and non-OPEC states including Russia first decided to reduce their oil output to rebalance the market, and agreed on additional reduction in December 2018. In July, they prolonged the deal until April 2020. At present, the agreement stipulates a production cut by 1.2 million barrels per day.

OPEC said on its official website that the next meeting of the OPEC+ monitoring committee will take place in the first week of March 2020, an extraordinary meeting of OPEC states on March 5, and an OPEC+ meeting on March 6.

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