Moscow Backs Opec-Plus Deal Rollover

Copyright © 2021 Energy Intelligence Group

Russia's preferred option for the Opec-plus deal is to extend the current cut until the end of the first quarter of 2021, sources tell Energy Intelligence. The deal and further possible scenarios were discussed at a meeting via video link of Russian oil company executives and Deputy Prime Minister Alexander Novak on Thursday. "The rollover [of the deal] for the first three months within the current [production] quotas seems the most probable scenario," an insider at one of the Russian oil producers told Energy Intelligence. Further details of the meeting remain unknown. The extension of the current cuts of 7.7 million barrels per day by the Opec-plus group into 2021, rather than relaxing restrictions by 2 million b/d, is seen as most likely by Opec officials. However, final consensus has yet to be reached and consultations will continue on Sunday among members of the Opec-plus Joint Ministerial Monitoring Committee (JMMC) co-chaired by Novak and Saudi Energy Minister Prince Abdulaziz bin Salman, before the final decision is taken on Dec. 1 (related). Novak traditionally holds consultations with Russian companies before the Opec-plus meetings to develop a collective stance on production cuts. Those discussions started about a month ago. Back then, Russian producers failed to arrive at a final view but the rollover for three months of the current limitations was viewed positively by many of them (IOD Nov.2'20). Before that, Russian President Vladimir Putin had indicated that Russia is flexible and could agree to any necessary steps, including the extension of the current restrictions or even deeper cuts, but only if the market needed those steps. "So far, there is no need to change anything in our current agreement," he said speaking at the Valdai discussion club meeting at end-October (IOD Oct.22'20). Novak's position is that the market is balanced at the moment, after describing it as being in a "stable state" on Nov. 17 at the last JMMC meeting on Nov. 17. Brent prices came close to $49 per barrel this past week. But Novak also says the balance is fragile and things could change quickly depending on how bad the second wave of the Covid-19 pandemic proves to be. If the current quotas are extended, Russia will have to restrain about 500,000 b/d of its production which it was supposed to add to its output in case the limitations were eased starting from Jan. 1. Some experts believe that this will not be too damaging for Russian companies that traditionally reduce output over the winter season due to severe frosts in Siberia and lower demand. The Russian Central Bank expects prices for Russian Urals crude export blend would average $41/bbl this year, going up to $45/bbl in 2021 and 2022, reaching $50/bbl in 2023. Russia's state budget needs a Urals price of $42.40/bbl this year to stop using the money from the rainy day National Welfare Fund to cover the budget shortfall under lower prices. Nelli Sharushkina and Nadezhda Sladkova, Moscow

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