(Bloomberg) — Russia doesn’t rule out delaying scheduled production hikes by the OPEC+ alliance, President Vladimir Putin said, the latest sign the cartel could restrain crude output for longer as the pandemic crimps demand again.
Production cuts are due to be eased — as part of a gradual tapering — from January but the cartel has hinted it may change tack as demand falters. While Putin said his preference was to adhere to the current plan, his comments are a show of unity between Russia and Saudi Arabia, whose leaders have been engaged in intense telephone diplomacy this month.
“We think there is no need to change anything now,” Putin said Thursday in his address to the Kremlin-backed Valdai Club. Yet “we don’t rule out that we may keep the current restrictions on output, that we don’t lift them as soon as we had planned earlier.”
rose after Putin’s remarks. On Friday, prices again retreated on concern that a second wave of the coronavirus may throw the energy demand recovery in Europe and the U.S. into reverse.
The Organization of Petroleum Exporting Countries and its allies, due to add almost 2 million barrels a day starting January, have warned of a precarious outlook, and increasingly traders have signaled the market can’t absorb the extra barrels.
“If necessary, we can take a decision on further cuts,” Putin said. “But so far we simply see no such need.”
After two phone calls in a week between Saudi Arabia’s Crown Prince Mohammed Bin Salman and Putin, the countries’ oil ministers displayed a united front at the last OPEC+ meeting. Their top oil officials, Prince Abdulaziz bin Salman and Alexander Novak, offered similarly bearish views and the prince called on the cartel to be “proactive” and ready to “head off negative trends and developments — to nip them in the bud.”
OPEC+ ministers will debate whether to stick to their tapering plan — which was decided during the depths of the oil crisis in April — at a meeting scheduled for Nov. 30-Dec. 1. In July, the group delayed by one month a similar production increase amid doubts about the strength of oil demand.
OPEC+ is a complex yet effective mechanism for stabilizing the global oil market, Putin said. “In this fragmented world, such an approach is really way more fruitful,” he said. Cooperation within the alliance “not only allows to solve specific problems but also is able to breathe new life into multilateral diplomacy.”
Putin spoke hours after Rosneft PJSC Chief Executive Officer Igor Sechin — a longtime OPEC+ skeptic — acknowledged that interactions between energy-producing nations are necessary, and called for action to stabilize the market.
While he didn’t mention OPEC+ by name, Sechin said that the world economy — and oil consumption — may start to recover next year, but that “humankind needs to take coordinated actions to achieve such a result.”
Sechin, a close ally of Putin, said in March — during a price war with Saudi Arabia — that Russia’s cooperation with OPEC could be over.
Despite Sechin’s opposition to OPEC+, Rosneft has been cutting its crude production in line with the group’s agreement. Russia’s overall compliance with the OPEC+ deal has been at 96% to 97% in the past two months.
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