The signal from Moscow suggests that both the stakeholders may prolong such voluntary cuts into October 2023. Russia, the second-largest oil exporter in the world, has been reducing output and exports in concert with Saudi Arabia in addition to current OPEC+ limits.

At a live-streamed cabinet meeting, Vladimir Putin questioned Alexander Novak, his point person for oil, on whether OPEC+ partners had approved a reduction in the supply of oil to global markets.

“We have agreed, but we will publicly announce the main parameters next week,” Alexander Novak replied.

Which parameters might be made public wasn’t immediately clear, and Alexander Novak’s office declined to make any further comments.

To support the market, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, led by Russia, started restricting supplies in late 2022. In June, the production restraints were extended through 2024.

Separately, Russia announced that it would reduce oil exports by 300,000 bpd in September and 500,000 bpd in August, or around 5% of total output.

Alexander Novak also stated that it was too early to make a firm prediction, but Russia may continue the cutbacks into October.

Analysts predict that Saudi Arabia will likely extend its voluntary 1 million barrel per day oil production cut for a third straight month into October 2023.

The voluntary cut was extended by Riyadh from August till September, with the energy ministry indicating that it may be “extended, or extended and deepened.”

The greatest monthly gain in Brent oil prices since January 2022 occurred in July when prices rose 14% over the previous month. On Wednesday, the price has grown by almost 1% on the day to USD 86.7 per barrel.

Meanwhile, Russian seaborne crude exports fell for a second consecutive month in July 2023 to fall below 3 million b/d for the first time this year while oil product exports held steady as domestic refineries emerged from the maintenance season, tanker tracking data showed.

Russia-origin seaborne crude shipments averaged 2.96 million b/d in July, a 15% fall on the month to the lowest since December and almost 890,000 b/d below the post-war high of 3.85 million b/d seen in May, stated S&P Global Commodities at Sea data. The latest export fall has put July’s total slightly below average pre-war levels of 3.1 million b/d.

Almost all the fall in Russian crude exports was seen to China where tanker shipments shrank by over 400,000 b/d, the S&P data stated further. Shipments to India, currently Russia’s biggest oil buyer, were little changed at 1.56 million b/d, while ship-to-ship transfers off Greece almost dried up in July.

“Overall, Russian crude transferred at sea in July slumped by 6.64 million barrels to 4 million barrels in July, the smallest STS volumes since November 2022. The crude export fall follows a surge in May when Indian refiners snapped up record volumes of discounted Russian crude. India refiners — which buy mostly Urals crude — saw imports of Russian crude soar to 1.9 million b/d in May,” S&P stated further.

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Recently, OPEC+ declared its most incredible cut since 2020. The actual drop from current OPEC+ oil output would be around 1 million BPD-1.1 million BPD, despite the “monster” headline amount of 2 million BPD. This is because many producers haven’t met quotas for months. In addition, western sanctions have led to decreased Russian oil output, which has joined Nigeria and Angola as OPEC laggards.

Russia was 1 million BPD below its 11-million-BPD quota for September, so it won’t have to cut output and will benefit from rising oil prices.

Saudi Arabia, meeting quotas, will shoulder most of the OPEC+ cut in November. As a result, Saudi Arabia will lower output by 526,000 BPD to 10.478 million BPD. Russia has the same goal but is 500,000 BPD short.

Despite OPEC+’s assurance that the decision to decrease production was “technical,” analysts saw the action as political. As a result, they expect oil prices to return to $100 per barrel sooner than expected and anticipate a 2023 oil market deficit. They also perceive Russia as a winner of the OPEC+ accord since oil prices will rise. At the same time, Russia’s production will fall, and Russia won’t have to cut a barrel of its output if it has a big enough market after December to sell the petroleum now heading to Europe.

Weak gas trading earnings could hurt Shell’s profits
Ole Hansen, Head of Commodity Strategy at Saxo Bank, said Russia is the winner of the OPEC+ cut due to dropping production, growing oil discounts, and a loss of gas profits. However, Hansen said the global consumer is the loser, while threats include a more aggressive Fed rate hike policy, a strong US dollar, and slower economic development.

After the OPEC+ summit, economists said oil prices would rise through 2022 and 2023.

Morgan Stanley predicts oil prices will rise to $100 per barrel faster than expected in the first quarter of 2023. Likewise, Goldman Sachs boosted its Brent crude prediction by $10 to $110 per barrel.

Russia’s Deputy Prime Minister, Alexander Novak, representing the country at OPEC+ meetings, said the government would not supply oil to countries with a price cap.

Such nonmarket tools undermine the energy market. According to Novak, if they want to implement such a mechanism, consumers will pay for it, as quoted by TASS. As a result, Novak said Russian oil and condensate production would fall next year.

Despite Russia and OPEC+’s assertion that the output cut is technical and aimed at “stability,” many analysts and the White House regard it as political.

“This is immensely political and a clear signal of Opec’s displeasure with the price cap. Whether or not the price cap works, they see it as a hazardous precedent,” said Energy Aspects’ Amrita Sen.

The White House called the OPEC+ cut “shortsighted” and “misguided.”

“We think this move by OPEC+ is a mistake and unwise. With today’s declaration, OPEC+ is siding with Russia,” White House Press Secretary Karine Jean-Pierre said.

In light of today’s move, the Biden Administration will work with Congress on additional tools and authorities to decrease OPEC’s grip over energy prices, Jake Sullivan and Brian Deese said.

The post OPEC+ cuts: Russia to be the benefiter? appeared first on International Finance.

IFM Correspondent

October 26, 2016: Speaking at the World Energy Congress in Istanbul, Turkey, Saudi Arabia’s Energy Minister Khalid al-Falih said that as market fundamentals improve, the current down cycle of crude prices is close to an end.

Oil prices are currently hovering around $50 per barrel after hitting a 10-year low of less than $30 in January, after having fallen from a peak of over $100 in mid-2014.

“The current down cycle is nearing an end,” Falih told a joint press conference with his Russian counterpart Alexander Novak after a Gulf ministerial meeting in Riyadh. “Market fundamentals, in terms of supply and demand, have begun to improve.”

Qatar’s energy minister Mohammed al-Sada, whose country holds the rotating presidency of the OPEC oil exporting cartel, also said the ‘difficult phase is over’. Further, he added, “Although the market is heading to being balanced, it needs our joint effort, and we all agreed that we need to take measures to bring back this balance.”

Views now closer to those of Russia

Al-Falih stated that the points of view of Saudi and Russia – the world’s leading oil producer – on the need to stabilise the market ‘are getting closer’.

“Saudi Arabia has started to play an important role of coordinating between Russia, and OPEC, specifically the Gulf countries,” Falih said at a news conference in Riyadh with his counterparts from Russia and Qatar.

“We have managed today, through a common meeting, to reach a common notion to what we can reach in November,” Falih said, referring to an OPEC meeting to be held in Vienna on November 30, when the group is set to finalise an agreement on a cut in production.

OPEC has invited Russia and key non-members to a meeting later in October as the cartel and Moscow seek to tighten cooperation to boost historically low crude prices.

Russia: Deal to depend on OPEC accord 

Novak said that Russia’s production level in any accord to shore up prices would depend on the agreement OPEC members reached between themselves beforehand, and on Moscow’s discussions with the exporter group.

“I would like to stress once again that we are not ready to give figures because consultations are continuing and the levels would be dependent on the final agreement of OPEC and the result of our OPEC negotiations,” he told reporters in Riyadh after talks with his counterparts from Saudi Arabia and Qatar.

When asked whether Russia would freeze production at current level or cut below them, Novak replied, “We are looking at a number of options. I don’t want to give the final decision yet but we are considering a few options at the moment.”

Bid to stabilise the market 

Earlier, al-Falih said that he had invited Novak to join the meeting of Gulf Arab oil ministers in Riyadh as part of efforts to cooperate with non-OPEC members to stabilise the oil market.

“Russia is one of the world’s biggest oil producers, and is one of the influential parties in the stability of the oil market,” Falih said at the opening session of the ministers of the six-member Gulf Cooperation Council (GCC).

Falih said Novak had welcomed the invitation, “as a clear indication of [a] sincere desire to continue cooperation and coordination with the oil producing and exporting countries for more stability in the market.”

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