Russia wants OPEC+ to react to oil demand recovery

Russia will propose to OPEC+ to react to the recovery in global oil demand, which has now reached 90 percent of the levels seen before the pandemic, Russia’s Energy Minister Alexander Novak said on Wednesday.

“We hope for speedy demand recovery and will propose to react to it under OPEC+ deal,” Reuters quoted Novak as saying.

Speaking at an online meeting to discuss Russia’s oil and gas industry, Novak said, as quoted by the TASS news agency, that Moscow hopes there would be faster demand recovery, to which it would react within the OPEC+ pact.

According to Russia’s energy minister, global oil demand will return to pre-pandemic levels at some point in 2021.

If it weren’t for the OPEC+ deal – in which Russia is the largest non-OPEC contributor – oil prices would have been $10-20 a barrel, and at times even negative, Novak said, noting that the record production cuts stabilized the oil market and prices.

As part of the OPEC+ deal, Russia’s oil production will drop by 13.8 percent year-on-year between August and December 2020, Novak added. Russia’s full-year oil production will be 10 percent lower in 2020 than it was in 2019, he said.

In August, when OPEC+ started easing the record cuts by 2 million bpd, Russia’s oil production rose by 5 percent from July, to reach 9.86 million bpd, according to Reuters’ estimates of energy ministry data in tons.

Russia’s production figures include condensate, while the OPEC+ deal excludes it. Considering Russia’s condensate production of around 700,000 bpd-800,000 bpd, and Russia’s crude oil production ceiling of 9 million bpd as of August 1, the figures show that Russia produced slightly more crude oil than its quota, according to Reuters estimates.

Pavel Zhdanov, Vice President for Finance at Russia’s second-largest oil producer, Lukoil, told Reuters, “Our experience with the previous OPEC+ deal and results of the last two months prove that stopped wells could be returned back to operation quickly without losing their productivity.”