No further oil production cuts beyond what major producers have already agreed to are needed as the global crude market has reached equilibrium, Interfax reported, citing Russian Deputy Prime Minister Alexander Novak.
“We made this decision just a month ago, and it will take effect from May for the countries that voluntarily joined the cuts,” Novak said in Moscow, referring to the OPEC+ restrictions, according to the news agency. Voluntary production cuts will support the market in the event of an imbalance, he added.
Russia and its partners in the Organization of the Petroleum Exporting Countries plan to hold their next meeting in early June to discuss the market situation. Some key members of the OPEC+ alliance announced surprise cuts of more than 1 million barrels a day earlier this month, amid concerns of a supply glut. These restrictions are in addition to an extension of Russia’s pledge to cut production by 500,000 barrels a day.
In just under a month since the announcement, global oil prices have fallen, supporting the alliance’s concerns. Futures erased all gains driven by the cuts amid a slower-than-expected economic recovery in China. That has raised questions about whether OPEC+ would see the need to intervene once again, announcing even deeper production curbs at the June meeting.
Russia’s own April crude output has already fallen, as promised, by 500,000 barrels a day, Novak said, without elaborating. According to Interfax, Russian production cuts are taking place amid the lower refineries due to seasonal downstream maintenance.
However, oil production at the country’s refineries has declined only slightly, according to the latest industry figures seen by Bloomberg. The nation’s crude exports are also robust, tanker tracking data show, raising questions about what is driving the promised cuts.
Russia classified its oil statistics last year due to their “sensitive” nature, making it difficult to assess the implementation of supply cuts beyond assurances from energy officials.
According to Novak, the country’s total crude and condensate production will fall by 20 million tons this year to 515 million tons, equivalent to 10.34 million barrels per day.
Russia plans to redirect about 140 million tons of exports of crude oil and petroleum products from Europe to Asia this year amid price caps and import bans, Novak said, according to Interfax. As a result, Russia’s top energy official expects the country’s supply of oil and fuel to Western markets to be around only 80-90 million tonnes by 2023.
The European Union has banned almost all imports of crude oil and petroleum products from Russia in retaliation for the war in Ukraine, forcing the country’s producers to find new markets for their supplies. In cooperation with the Group of Seven industrialized nations, the EU also imposed price caps on Russian fuel exports to third countries, with the aim of limiting the Kremlin’s energy income.
