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29 Nov, 2014 15:49

Russia not planning to reduce oil production – Deputy PM

Russia not planning to reduce oil production – Deputy PM

Moscow is to stay in line with OPEC’s decision not to cut oil production, said Russia's First Deputy PM. The move serves to secure the country’s position on the market and protect the budget.

"The experts say that one of the main reasons behind the falling oil prices is that some Arab oil producing countries... are squeezing out shale oil from the international market," Igor Shuvalov told Rossiya-1 TV Saturday.

"If such actions are happening with the aim to fix or confirm one's position on the market, we should not do anything at the moment to scale down our positions."

The US is seeing a peak in shale oil market production, which has drastically affected the global oil market dampening prices. Shuvalov admitted that falling costs have dragged the ruble down to a degree it cannot be ignored.

“The decision of Russia’s Central Bank to turn to a floating course for the ruble and plunging oil prices is a serious challenge to us,” he said, explaining the reason why Moscow followed the recent OPEC meeting closely.

“We should protect our own interests, not the interests of all the major oil producers who are part of this bloc,” Shuvalov said. “And at the moment Russia is not interested in reducing oil extraction.”

Moscow understood that the Organization of the Petroleum Exporting Countries would not take a decision to cut crude production, so chose not to press anyone into it.

Reuters / Sheng Li

“We neither pushed for this decision, nor advised it,” he remarked, adding that OPEC’s decision protects the interests of Russia’s oil companies as well as the state budget.

READ MORE: Brent crude drops below $70 for first time in 4 yrs, ruble in new historic plunge

Russia’s minister hopes that crude prices will rise in the nearest future as a tough winter is coming and countries will need more energy.

On Thursday, OPEC took a ‘unilateral decision’ to cut production and to leave the daily output ceiling unchanged at 30 million barrels, despite a major oversupply that has caused oil prices to fall more than 30 percent.

Following OPEC’s decision, Brent Crude plunged, falling below $70 per barrel, while crude dropped to $66 per barrel.

The Russian ruble also slumped back after the OPEC made its decision. During the week the currency had been making attempts to recover. The ruble went down to 49.32 against the dollar on Saturday; the ruble’s rate to the euro has hit 61.41.

On Friday, Russian Economic Development Minister Aleksey Ulyukaev said that low oil prices will not ruin the economy. He added that the oil price estimate for the 2015 budget has been slashed to $80 a barrel from $100 a barrel.

READ MORE: Russian markets & ruble hit new lows, as OPEC oil decision weighs

Playing politics is a big part of OPEC, and US shale success is a problem for Gulf-producing nations, the executive director of DV Advisors, Patrick Young, told RT.

“There are all sorts of politics involved. OPEC never misses a trick to play politics,” Young said. “There is an issue with America. The problem with America is that it is producing more and more oil at the moment and actually if OPEC as a cartel simply cut the amount of oil it produces, American shale would fill the gap.”