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OPEC+ inched closer to delaying its January output increase, with Russia actively discussing keeping its current curbs for an extra three months as oil markets weaken.
The producer group has been dropping hints for weeks that its plan to add almost 2mn barrels a day to oil markets next year may not be such a good idea as the demand recovery falters.
Since President Vladimir Putin first said he was open to a delay, the outlook has worsened. France, Germany and the UK are going back into lockdown to curb the spread of the virus, while the US has been seeing record numbers of daily cases.
Oil slumped 10% in London last week, with traders seeing signs of weaker demand, just as a peace deal in Libya floods the market with additional supplies. Crude futures dipped another 5% in the early hours of Monday, dropping to almost $35 a barrel, but recouped those losses as news emerged from Moscow.
On Monday, Russian oil companies discussed with Energy Minister Alexander Novak the possibility of delaying the easing of OPEC+ output cuts by three months, said people familiar with the matter.
There were also talks about potentially deepening the current curbs by the Organization of Petroleum Exporting Countries and its allies, but that was not considered to be the base case, said one person. The main focus was a possible delay, the people said.
Russian companies are contributing the biggest tranche of production cuts after Saudi Arabia, so any change to the terms of the agreement between OPEC+ requires their cooperation. Novak typically meets with senior executives from the country’s oil producers before OPEC+ policy decisions, the next of which is scheduled for the end of November.
No final decision was made at the meeting and the nation “hasn’t prepared its official position,” Deputy Energy Minister Pavel Sorokin said later on Monday at the Moscow Exchange Forum. Russia will do that after November 17, when the OPEC+ Joint Ministerial Monitoring Committee will meet for a discussion, he added.
An extension of the current cuts is now under discussion in the government, said a person familiar with the situation. However, Russia has not yet formed a position on what the next OPEC+ move should be, he said.
OPEC+ agreed in April to remove 9.7mn barrels a day from the market, a deal that boosted prices out of a historic slump caused by the coronavirus pandemic. As the global economy recovered, the group eased those curbs by 2mn barrels a day in August.
