The one-month extension to the deepest OPEC+ oil production cuts will be enough to speed up market rebalancing and there is no need to extend the deep cuts further, said Russia’s sovereign wealth fund chief Kiril Dmitriev in an interview for business news outlet RBC.
As economies begin to exit from coronavirus-prompted lockdowns, oil demand is starting to recover, so there is no point in further extending the deep cuts, Dmitriev said, adding that the one-month extension beyond the initial end-June expiry of the deep cuts was a “very wise decision.”
Asked about the price war Saudi Arabia unleashed on oil market following Russia’s initial refusal to extend earlier agreed cuts, Dmitriev said “Every country acts in its own best national interests. But the plus in the OPEC+ deal is that the group can act together serving the interests of both Saudi Arabia and Russia, as well as other producers, and oil consumers, too.”
OPEC+ agreed earlier this month to extend the 9.7-million-bpd oil production cuts it agreed to in April for another month as the pandemic-related national lockdowns around the world erased a substantial chunk of global oil demand and pressured prices further. Russia was reluctant about the extension, however, at least publicly.
Russia agreed to implement some of the largest cuts in the extended oil cartel in April, reducing output from a baseline of 11 million bpd to 8.5 million bpd beginning in May. Oil companies were not particularly happy about it, just as they weren’t happy about the earlier cuts, with Rosneft’s chief executive Igor Sechin being vocal about this unhappiness.
The economy has also suffered as a result of the cuts, according to data from ING released earlier this week. It showed industrial activity down by 9.6 percent in May, the first month of effective cuts, of which 5 percentage points came from the oil output cuts.