Russia isn’t ready to support a possible extension of oil-supply cuts into the second half of the year, even as more crude producers acknowledge they will probably need to do so to achieve their goals of balancing the market and firming up prices.
Five members of the Organization of Petroleum Exporting Countries have signaled their support for a possible extension, along with non-member Oman, which joined the deal on output cuts that OPEC and 11 other suppliers reached in December. OPEC’s biggest producer Saudi Arabia has indicated it’s willing to extend the agreement if global stockpiles remain above their five-year average.
Ministers from seven of the 24 countries participating in the cuts deal met Sunday in Kuwait City to monitor compliance. They called on OPEC to present recommendations next month on whether to extend the accord, which took effect in January, beyond its initial six-month term.
Russia needs more time to assess the market, inventories and production in the U.S. and other non-OPEC countries, Russia’s Energy Minister Alexander Novak said in an interview with Bloomberg television. The monitoring committee discussed the option of extending the cuts “but we have decided that in order to make any decision like this or even any recommendations there needs to be a ministerial meeting.” OPEC ministers are due to meet in Vienna on May 25.
Russia has cut its production by 185,000 barrels a day compared with a target of 300,000, Novak said Saturday. It was always the plan to implement the reductions in output gradually, and Russia’s progress has been faster than anticipated, he said on Sunday. Much of Russia’s oil production is in the hands of listed companies, giving the state less control over production than a state-run monopoly such as Saudi Arabian Oil Co., known as Saudi Aramco.
“We are monitoring companies on a weekly basis for their production plans,’’ Novak said. “At the moment, all companies are conforming to their obligations. Companies don’t want to stand out among a group that is conforming.’’
Novak declined to speculate on oil prices, after Russia’s central bank said last week that it saw a risk of oil prices falling to $40 a barrel by the end of this year without an extension in the deal and then staying close to that level in 2018-19. Benchmark Brent crude closed Friday at $50.80 a barrel.
“The Finance Ministry always bases the budget on very conservative numbers,’’ Novak said. “In real life we might see different numbers.’’
Russia will hold an energy dialogue meeting with OPEC in Moscow on May 31, Novak told reporters in Kuwait.