On the 26th of this month, Russia was said to be determined to reduce production cuts starting in July in accordance with the OPEC+ agreement. Russia predicts that global supply and demand may reach balance in June or July. The next OPEC+ meeting will be held via video conference on June 9-10, and finance ministers will discuss output policies after reaching a historic agreement. Russia expects OPEC+ to adopt a wait-and-see approach on whether to further cut production.
On May 26 (Tuesday), people familiar with the matter revealed that Russia hopes to start easing oil restrictions in July. The intensity of the production cuts is consistent with the terms of the OPEC+ agreement reached in April. Russia predicts that global supply and demand may reach balance in June or July. OPEC+ will hold a video conference on June 9-10 to discuss the impact of the production reduction agreement implemented in May and decide on future production policies. Russia expects OPEC+ to take a wait-and-see approach on whether to further cut production.
Russia hopes to start from July Begin to relax production cuts
OPEC and its allies reached a historic production reduction agreement in April due to a sharp drop in demand caused by the epidemic. According to media reports, as part of the production reduction agreement, Russia hopes that the extent of its production cuts will gradually decrease from July.
But after the deal was signed, Saudi Arabia tried to support the market with additional production cuts, and Gulf allies followed suit. As OPEC+ prepares to meet in two weeks, its members are weighing whether to expand or reduce production cuts. Three Russian officials and two industry insiders said Russia’s position was to stick to the original agreement. On May 26, a Kremlin spokesman told reporters that the agreement was “undoubtedly successful” and that countries would observe the development of the situation before making a decision at a meeting on June 10.
The historic agreement reached in April this year marked the end of the price war between Russia and Saudi Arabia, helping to reduce global supply glut and promote the recovery of oil prices. On May 26, Brent crude oil rose 1.44% to US$36 per barrel, up nearly 70% from a month ago, as the easing of epidemic blockade measures boosted oil demand. But with oil prices at such levels, it’s still a blow to Russia’s budget.
According to the Russian business newspaper Kommersant, on May 26, Russian oil producers discussed the future of the OPEC agreement with Russian Energy Minister Alexander Novak, including the The possibility of extending the deepest production cuts for another two months.
“Kommersant” quoted an unnamed person as saying that the above discussions between the two parties coincided with Saudi Arabia’s pressure to extend production cuts. According to the newspaper, no consensus was reached at that meeting.
Russia said that oil demand is approaching normal levels
No. WACKER said in a statement on May 25 that although the oil surplus remains at around 7 million to 12 million barrels per day, Russia expects that global supply and demand may reach balance in June or July.
Russian industry players are also cautiously optimistic about economic recovery. Records from St. Petersburg oil terminals showed that European demand for some petroleum products such as diesel has rebounded sharply as blockades are lifted. Fuel from major refineries is shipped to Europe.
“We are seeing demand approaching normal levels, except for aviation fuel consumption, which may take three years,” Mikhail Skigin, the terminal’s chief executive, said in an email. To return to 2019 levels.”
Stiftung expects that Russia’s domestic refineries will resume normal operations this summer after a large-scale shutdown earlier this month.
In Russia, the process of reducing production is painful, and producers face their biggest challenge in decades: shutting in large numbers of wells without permanently damaging the fields. Russia’s production cuts account for about a quarter of OPEC’s total production cuts.
Russia expects OPEC+ to adopt a wait-and-see attitude on whether to further cut production
The Russian government stated that Russia and OPEC need to analyze the global oil market before deciding whether to modify the production reduction agreement.
When asked whether Russia believed it was necessary for OPEC+ to further reduce production to deal with the global oil supply glut, Russian President Vladimir Putin’s spokesman Dmitry Peskov told reporters, “Obviously, countries will pay attention to the development of the situation. .” He said the agreement has a strict timetable and Russia will be a responsible participant.
OPEC+ has agreed to reduce production until April 2022 to balance the market amid the impact of the epidemic. The organization will hold a video conference on June 9-10 to discuss the impact of the production reduction agreement that began in May. The production cuts are planned to be gradually reduced starting in July, and OPEC+ may use the June meeting to decide future production policies.
So far, the production reduction agreement has achieved results. Saudi Arabia has agreed to deep cuts in output, and oil-producing countries outside the group, such as the United States, have also been forced to shut down operations. This makes people wonder whether Russia, as the de facto leader of OPEC, which is allied with Saudi Arabia, will follow in the footsteps of Saudi Arabia.
The risk of the epidemic has not dissipated
However, risks are everywhere . Countries’ policies to ease epidemic lockdowns could trigger a second wave of infections and bring oil demand back to where it was in April.Such a low position. As the world’s third-largest oil consumer, it may take months for oil demand in India to return to normal levels.
Putin’s spokesman Peskov said that in this case, the OPEC+ agreement has shown its efficiency and the real impact will appear over time. He said: “Of course, problems related to insufficient demand and overproduction cannot be completely eliminated, because it is impossible to completely reverse the global situation.”
Traditionally, Russia has tended to adopt a wait-and-see approach to deepening or extending production cuts. , this attitude led to Russia’s disagreement with Saudi Arabia at the OPEC meeting in March. While Saudi Arabia supports further production cuts during the epidemic, Russia wants to wait a few months before making a decision. Their fallout sparked a price war that ended with a new production-cut deal brokered by U.S. President Donald Trump.
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