Russia: No Coordination With OPEC Output Cut

Russia: No Coordination With OPEC Output Cut
Russia: No Coordination With OPEC Output Cut

Russian Energy Minister Alexander Novak said coordinated oil production cuts with OPEC to support falling oil prices were unlikely and would be inefficient if they did happen anyway.

Novak's comments on Friday follow a meeting last month of the Organization of Petroleum Exporting Countries, which ended without any agreement on how to prop up prices and after some OPEC members urged Russia to cut its own oil output, Reuters reported.

"From our point of view, it is unlikely that all the countries within OPEC can agree on production cuts, let alone those countries which are not in the OPEC coalition," the RIA news agency quoted Novak as saying in an interview with RBC TV.

"Such consultations have been underway for the past year and a half since oil prices started to fall in mid-2014," he said. "But we see that in 2015 countries like Saudi Arabia in OPEC have increased total production by 1.5 million barrels per day."

Any coordinated efforts to cut oil output would "not be efficient" anyway, he said, because balance in the market depended mostly on shale oil output in the United States.

Oil prices have fallen by more than 70% over the last 18 months, mainly as a result of oversupply. That presents a challenge for Russia, where oil and gas sales account for more than half of its budget revenues. Russia has in the past brushed off calls for it to cut output by saying its harsh climate would make it hard to quickly restart production once wells had been closed.

Novak said the critical oil price level for domestic oil producers was $5-$15 per barrel, which amounted to the cost of production. He ruled out the oil price falling to a long-term price of $10 per barrel from around $30 now.

Brent crude futures plunged as much as 5.5% to near 12-year lows on Friday as the market braced for increased Iranian oil exports, with the lifting of international sanctions possible within days. But the US bank Goldman Sachs maintained its $40 price forecast for US crude for the first half of 2016.

"The key theme for 2016 will be real fundamental adjustments that can rebalance markets to create the birth of a new bull market, which we still see happening in late 2016," Goldman said in a report.