After Russia agreed on Friday to cut its oil production as part of the non-OPEC group tasked with cutting 400,000 bpd of oil production, Energy Minister Alexander Novak said it would take Russia “months” to get down to its requested level.
While there were no specific figures or targets released to the public for each individual member of the OPEC and non-OPEC groups to hit, non-OPEC was saddled with a 400,000 bpd burden, while OPEC itself agreed to cut 800,000 bpd. Unofficial sources, according to Tass, has Russia’s portion of the cuts pegged at 228,000 bpd, which is 2% of its October levels.
Shortly after the meeting concluded on Friday, Alexander Novak dampened high spirits among the oil bulls. “The oil production will be reduced, just as two years ago, as quickly as possible in terms of technology. I think it will take several months,” Novak said at the after-meeting press conference.
Russia, together with Iran, had been a critical unknown factor leading up to the production cut meeting. Russia’s cooperation with the long-standing, largely Middle Eastern oil cartel was certainly not a given, nor is it officially affiliated with the cartel, although there have been rumors about making its relationship with OPEC official.
Prices fell a day earlier on Thursday after the OPEC + Russia meeting ended without resolution. Novak had left the meeting to return to Russia to discuss the matter with President Vladimir Putin, who returned to the negotiating table early on Friday. Saudi’s Energy Minister Khalid Al-Falih dutifully managed expectations on Thursday, saying that he was “not confident of an agreement” and that Russia was “not ready for a substantial cut.”
After floating the possibility that a deal would not be reached at all, what looked like a modest 1.2 million bpd a week ago now looks pretty attractive.
Oil prices responded in kind on Tuesday on the news of the deal, with both the WTI and Brent benchmarks climbing nearly 5% on the day.