Russia’s Rosneft says oil production cuts may not be extended
“We think that in the long term global oil demand dynamics and reduced investment during the period of ultra low prices will balance the market, but that the risk of a price war resuming remains,” the spokesman said.
OPEC and 11 non-OPEC producers agreed in November to curtail their collective crude oil output by almost 1.8 million barrels per day (bpd) between January and June, with OPEC shaving off around 1.2 million bpd, and non-OPEC producers – led by Russia – slashing another 558,000 bpd.
The deal had held prices above $50 per barrel before WTI fell to below $50 a barrel last week for the first time since December. This drop has further increased speculation whether the deal should or would be extended beyond its original expiry date at end-June, given the rise in US shale.
Although OPEC is scheduled to decide on a possible extension in May, estimates and guesses are many, and now Rosneft has expressed its view via emailed answers to questions by Reuters.
While Rosneft described the agreement as viable, it believes that the long-term stabilization of prices should involve not only producers, but also key consumers and regulators, which is highly unlikely given the current global political and economic turbulence.
Therefore, there is a risk that the deal will not be extended, due to both the positions of the main participants as well as US shale, which is unlikely to have a great desire to join any production cut agreement in the foreseeable future, Rosneft told Reuters.
Saudi Arabia’s price war failed to result in dramatically boosting its market share because of the efficiency and resilience of the Russian oil industry, the Russian oil giant reckons.
The Saudis will continue to be interested in controlling the price of oil by trying to strike a balanced price that would allow them to increase oil revenues on the one hand, and curtail a significant rise in US shale output on the other hand, Rosneft told Reuters.