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Russia says Opec+ sees no need for further oil output cuts

Russia reached its targeted output this month after announcing cuts of 500,000 bpd

Russian Deputy Prime Alexander Novak said on Thursday that the Opec+ group of leading oil producers saw no need for further oil output cuts despite lower-than-expected Chinese demand, but that the organisation can always adjust policy if necessary.

He said Russia reached its targeted output this month after announcing cuts of 500,000 barrels per day (bpd), or 5 per cent of its oil production, until the year-end.

Russia is part of the Opec+ group of oil producing countries that announced a combined reduction of around 1.16 million bpd earlier this month, a surprise decision the United States described as unwise.

Novak said Russian oil and gas condensate production is expected to decline to around 515 million tonnes (10.3 million bpd) this year from 535 million tonnes in 2022.

Asked if the group needed to lower its output further because of falling oil prices, Novak said: “Well, no, of course not because we only made a decision (on reduction) a month ago, and it will come into force from May for those countries that have joined.”

He said the recovery of oil demand in China following the Covid-19 pandemic was “probably lower” than analysts and experts had expected.

Novak said Opec+ did not expect oil shortages on the global oil market after the production cuts, even though the International Energy Agency (IEA) said they risked exacerbating a supply deficit expected in the second half of the year.

“My opinion is that now the market is balanced, taking into account the decisions made earlier, taking into account our reduction, the reductions that we saw in other countries,” Novak said.

Following severe Western sanctions against Moscow over Ukraine, Russia has maintained its oil production and exports by increasing sales of its energy products outside Europe, its traditional supply market for oil and gas.

Novak said that Russia will this year divert 140 million tonnes of oil and oil products to Asia that previously would have headed to Europe. He also said Russia will supply between 80 million tonnes and 90 million tonnes of oil and oil products to the West in 2023.

Asked for his view on future oil price direction, Novak said he could not predict prices, which have been trading around $80 a barrel, far below peaks of well over $100 last year.

The market rallied following the Opec+ announcement of surprise cuts, but has weakened in response to market concerns about recession and the impact that would have on demand.