Putin: Oil Pact With OPEC Can Be Extended to End of 2018

Russian President Vladimir Putin said Moscow is open to extending a deal with OPEC to curb oil supplies to the end of 2018, though he will wait to make a decision near the expiry of the current pact in March.

The comments are the strongest signal yet that Kremlin is willing to redouble efforts to lift global energy prices, coming as Putin prepares to welcome King Salman bin Abdulaziz of Saudi Arabia to Russia for the first time this week.

Energy Minister Alexander Novak last month signaled his country's willingness to prolong the cuts if needed, while stressing that the commitment was not open-ended, Bloomberg reported.

“Based on the realities in March 2018, we will make our decision, but I do not rule out that we may extend” the agreement, Putin said at the Russian Energy Week conference in Moscow on Wednesday. “If we speak about a possible extension, then of course, it should be at least until the end of 2018.”

Brent crude pared losses to reach an intraday high of $55.89 a barrel following Putin’s comments. The international benchmark was down 0.4% at $55.78.

Russia, which relies on energy for more than a third of its budget revenue, reached a historic accord last year with the Organization of Petroleum Exporting Countries to cut production, hoping to eliminate a global oversupply.

While the nation’s economic growth accelerated to the fastest pace in almost five years in the second quarter amid recovery in crude prices, the supply glut has taken longer than expected to clear. Growing US shale output means the market could return to surplus again next year if the producers were to reverse their curbs.

Russia’s budget revenue from oil and gas taxes, which earlier this year recovered to 2015 levels, fell again by July on crude-price fluctuations and a stronger ruble. While oil prices have since returned to a bull market, risks remain and crude could fall as low as $40 a barrel next year, according to the nation’s central bank.

OPEC and its allies have already discussed prolonging their deal well into the second half of 2018, people familiar with the matter said last month. The group’s own forecasts show that even with demand for its oil likely to increase next year, reversing the cuts could potentially tip the market back into surplus.