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News // Middle East and OPEC

Russian effort to comply with OPEC balancing effort based on market, not price

17 January 2018 , 12:07Daniel J. GraeberNeftegaz.RU635

The situation on the market, not the price of oil, determines Russia's appetite for complying with the OPEC balancing act, Russia's energy minister Alexander Novak said on January 16, 2018.


Russia is among the handful of producers party to the OPEC playing a role in the multilateral effort to balance an oversupplied market for crude oil with coordinated cuts in output. Russia is also the largest non-OPEC contributor and a member of a joint committee monitoring compliance.


Geopolitical risk, global energy demand forecasts and the late 2017 decision by OPEC to extend the deal for another year helped push crude oil prices to 4-year highs. That's led to some concern that parties to the agreement could cheat in order to capitalize on the 4 % spike in crude oil prices so far this year.


Brent crude oil closed above $70 per barrel Monday for the 1st time in 4 years. Alexander Novak said that price wasn't driving compliance, however.

«We look at the balance of demand and supply in the 1st instance,» he was quoted as saying by Tass. «Prices are not the main factor for us.»


The deal, coordinated more than a year ago and implemented in January 2017, aims to drain the surplus on the 5-year average in crude oil inventories by sidelining about 2 % of global demand for oil.


In September, before the agreement was reached to extend the deal through 2018, Novak told Austria's Die Presse that a shorter extension may be preferred because of supply and demand dynamics

«It's better to end the agreement during the growing demand period,» he said. «It usually takes place in summer. When the demand will grow, everyone should gradually withdraw from the agreement.»


The next meeting for the monitoring committee, with Saudi Arabia and Russia as co-chairs, is January 21 in Oman.


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