Russia cautious on Opec output deal

OREANDA-NEWS. September 30, 2016. Russia has given a cautious welcome to Opec's proposed production deal, reached yesterday in Algiers.

Energy minister Alexander Novak said Opec's return to market management was "really a positive signal", but said Russian engagement with the deal would be dependent on the macroeconomic situation and the plans of oil companies operating in the country.

Novak said Russia would talk with Opec between now and the organisation's next meeting on 30 November, with a view to potentially repeating an offer made in April to freeze its production. Then, Russia offered to hold production at 10.7mn b/d should there be a broad participation in limiting output by major producers.

"We focus on the preservation of the volume of production at current levels", Novak said, pouring cold water on any hopes Russia may be persuaded to cut output. Russia has been pumping crude at record levels for most of 2016 and more is on the way from new fields, such as Rosneft and Gazpromneft's East Messoyakh and Lukoil's Filanovsky. And the country's crude exports are poised to hit a post-Soviet high this year.

The details of Opec's agreement — including the period for which the production ceiling would be in place — are yet to be made public. Novak today said six months, "give or take a few months", may be optimal.

"It is important to have a price which would allow to invest in the development of new fields", Novak said. "The price in the range \\$50-60/bl is comfortable and will satisfy both the interests of producers and the interests of consumer countries."