Russia agree to cut 200,000 bpd
Russia is ready to cut oil output by 200,000 barrels per day.
Russia is ready to cut oil output by 200,000 bpd if OPEC offers to cut more than 1 million bpd, Reuters reported.
On December 6, OPEC ministers discussed the oil production cut by 0.9-1.0 mln barrels per day within the Organization’s framework and believe that ten non-OPEC countries should assume a half more of this portion, two sources in OPEC said.
A leading analyst of the National Energy Security Fund, a lecturer at the Financial University under the Government of the Russian Federation, Igor Yushkov, speaking to Vestnik Kavkaza, noted that Russia's agreement to cut oil output by 200 thousand barrels is a compromise. “They wanted us to cut our output by 300 thousand barrels per day, while we offered 150 thousand barrels per day. This is quite a normal decision, since it’s important for Russia to agree on something, because if the parties come to nothing, the next wave of panic would have started on the market, prices would have dropped. Both Saudi Arabia and Russia agree that no one needs this panic, as well as a further decline in oil prices, which means that it is necessary to negotiate," he said.
"I think both sides have taken a constructive position. Now they will begin the process of tightening the rebalancing of the agreement, the goal is to delay it until March, when sanctions against Iran come into force and Iranian oil will leave the market. When the situation becomes clear, they can weaken efforts to cut output and even increase oil production again. I think now we may return to the level of $70 per barrel, but they will try to avoid a level of $80 per barrel to avoid reviving the American shale projects," Igor Yushkov noted.
The advisor on macroeconomics to the CEO of the 'Opening-Broker' brokerage house, economist Sergey Hestanov, said that a possible reduction in oil production of 200 thousand barrels per day is quite acceptable for Russia. "It is fundamentally important to conclude the agreement. Last time, our quota was 300 thousand barrels per day. It is always very difficult to agree such deals due to the fact that there are endless disputes about how much to reduce. Therefore, it can only be welcomed," the expert noted.
In addition, he recalled that in the early 1980s and 1985, there were similar disputes within OPEC. “Then, everyone promised to cut oil output, but in reality, almost everyone except Saudi Arabia violated the agreement, which caused a decline in prices. In the end, Saudi Arabia lost patience. In September 1985, Sheikh Yamani, who served more than 24 years as oil minister of Saudi Arabia, came out to journalists and announced the start of the struggle for oil on the market. The Kingdom increased oil production and next year prices dropped fourfold. Strictly speaking, it was the start of the collapse of the Soviet Union," Sergey Hestanov said.