Russia May Lift Crude Output if Supply Cut Deal Lapses

Russia May Lift Crude Output if Supply Cut Deal LapsesRussia May Lift Crude Output if Supply Cut Deal Lapses

Russian oil output could climb to its highest rate in 30 years if OPEC and non-OPEC producers do not extend a supply reduction deal beyond June 30, according to comments by Russian officials and details of investment plans released by oil firms.

The Organization of Petroleum Exporting Countries, along with Russia and other non-OPEC producers, pledged to cut 1.8 million barrels per day in output in the first half of 2017, Reuters reported.

With global inventories still bulging, Persian Gulf and other producers have shown increasing willingness to extend the pact to the end of 2017. Saudi Arabia and Kuwait signaled last week they were ready to prolong cuts.

Russia, whose contribution to the cuts was 300,000 bpd, has yet to state publicly whether it wants cuts to run beyond June, although Moscow was represented on a panel monitoring the pact that on Friday recommended an extension.

But Russian officials have also indicated that local oil companies were ready to push up output once the pact runs out.

"According to investment programs of (Russian) companies, it is possible that Russian oil production will increase once the deal expires," Deputy Prime Minister Arkady Dvorkovich said, adding firms had been held back while the deal was in place.

"If there are no restrictions, they will decide not to hold back," he said, speaking at the weekend on the sidelines of an economic conference in the East Siberian city of Krasnoyarsk.

Energy Minister Alexander Novak told Reuters in March that output could reach 548 million-551 million tons a year in 2017, equivalent to 11.01 million-11.07 million bpd, the highest average since 1987. In 2016, Russia produced about 547.5 million tons, or an average of 10.96 million bpd.

The news comes as Russia retook the top spot from Saudi Arabia in crude supplies to China last month as OPEC producers are mulling over the possibility of extending the cuts.

The world’s largest energy consumer increased imports from Russia by about 9.3% to 4.69 million metric tons in March from February, according to data released Tuesday by the General Administration of Customs. That is also up 0.9% from a year earlier.

Add new comment

Read our comment policy before posting your viewpoints