Russia's wait-and-see stance on OPEC and allies cuts shows gap with Saudis

Andrey Rudakov/Bloomberg

A close look at an oil drilling derrick.

- Oil-output decisions won't be made until December, Novak says
- Saudi Arabia has sought cuts of about 1 million barrels a day

By Olga Tanas and Dina Khrennikova / Bloomberg

MOSCOW
Petroleumworld 11 20 2018

Russia's energy minister insisted the country and its allies in OPEC need to watch the oil market in the coming weeks before making any decisions to cut output.

“We need to see how the situation develops in November and early December to better understand both the current conditions and the winter outlook,” Alexander Novak said in Moscow on Monday. His refusal to join Saudi counterpart Khalid Al-Falih in calling for a broad production cut shows their different positions persist just weeks before a key OPEC+ summit in Vienna.

“We need to make a balanced decision, and so far there are no criteria for it,” Novak said. While producers did discuss potential output curbs at a meeting in Abu Dhabi earlier this month, they agreed to wait until their December summit before making any decision as more clarity on supply and demand is needed, he said.

A week ago, Al-Falih said the Organization of Petroleum Exporting Countries and its allies need to cut about 1 million barrels a day from October production levels, reversing about half the increase in output they made earlier this year. The Saudi pronouncement came as fears of supply shortages just a few months ago were supplanted by concerns about an emerging glut and collapsing prices.

Since Saudi Arabia and Russia are the two de facto leaders of the OPEC+ alliance, their differing stance suggests negotiations on Dec. 7 could prove difficult.

The Saudis need an oil price of $73.30 a barrel next year to balance the fiscal budget, according to the International Monetary Fund. That's $6 higher than the current price of Brent crude. In Russia, the state budget is much less dependent on oil prices than it was when the country agreed to join OPEC-led efforts to rebalance the market back in 2016.

President Vladimir Putin said last week that a price around $70 “suits us completely.” Russia's budget will balance next year even if prices for the country's export blend drop as low as $40 a barrel, according to the Finance Ministry.

Original article

_________________________

Story by Olga Tanas and Dina Khrennikova from Bloomberg

bloomberg.com 11 19 2018

_________________________

Copyright© 1999-2018 Petroleumworld or respective author or news agency. All rights reserved.

We welcome the use of Petroleumworld™ (PW) stories by anyone provided it mentions Petroleumworld.com as the source.

Other stories you have to get authorization by its authors. Internet web links to http://www.petroleumworld.com are appreciated.

Petroleumworld welcomes your feedback and comments, share your thoughts on this article, your feedback is important to us!

We invite all our readers to share with us
their views and comments about this article.
Write to editor@petroleumworld.com

By using this link, you agree to allow PW
to publish your comments on our letters page.

Any question or suggestions,
please write to: editor@petroleumworld.com

Best Viewed with IE 5.01+ Windows NT 4.0, '95, '98,ME,XP, Vista, Windows 7,8,10 +/ 800x600 pixels