Russia will not increase its oil output in 2016, sticking to production levels same as last year, but is worried that a delay in a deal to freeze output by major crude producers could extend the low-price period longer.
Russia’s Energy Minister Alexander Novak said the country did not plan to raise output, adding he considered the initiative to stabilise oil output to January 2016 levels as reasonable.
Negotiations, led by Saudi Arabia and Russia, on potential oil production freeze are underway but there are concerns that Iran’s decision to not join the initiative might be put a spanner in the plans.
According to TASS, Novak said the lack of an agreement on oil production stabilization may extend low oil prices cycle until 2016-2017 and further on.
“Offer surplus over demand will decline quicker on account of the demand growth if production is at least not increased, as four of us agreed in Doha, and if the majority of countries do not scale up production,” Novak said.
He said competition will continue if countries fail to agree on a deal, with those capable of raising output boosting production and extending the low-prices cycle to next year.
“In case the offer on the market is not increased, then we will be able to lower this imbalance by 1.3-1.4 mln barrels daily. According to experts’ estimates, it is about 1.6-1.8 mln barrels [daily] at present,” Tass quoted the minister as saying.
Novak said the freeze deal could be formalised by the middle of this month at a meeting of OPEC and non-OPEC oil producers.
Oil production stabilisation arrangements may be formalised in mid-March at the meeting of OPEC and non-OPEC states. “Proactive consultations at the country level are underway now,” Novak said.
Iran’s participation in the deal requires an individual approach and is still under discussion, Novak said, adding that Russian-Iranian joint projects in the energy sector are planned for the discussion in March in Iran.
“The topic if Iran’s participation is still in the stage of discussion and negotiations. It involves those countries that went to Iran. I think that there may be different options for Iran. We hear that they are not willing to actually reduce, to freeze the volume of production, given that the base is fairly low in comparison with other producers. That is why an individual and objective assessment is necessary,” he said.