Igor Sechin, Russia’s most influential oil executive and the head of Kremlin energy champion Rosneft, said his company would not cut or freeze oil production as part of a possible agreement with Opec.
His comments underline how difficult it is for Russia to get its oil companies to freeze or cut output as part of a potential deal with the Organisation of the Petroleum Exporting Countries designed to support oil prices.
President Vladimir Putin told an energy congress on Monday that Russia was ready to join the proposed Opec cap but did not provide any details.
“Why should we do it?” Sechin, known for his anti-Opec position, said in Istanbul on Monday evening, when asked if Rosneft, which accounts for 40 per cent of Russia’s total crude oil output, might cap its own output.
Sechin said he doubted that some Opec countries, such as Iran, Saudi Arabia and Venezuela would cut their output either, saying that an increase in oil prices above $50 per barrel would make shale oil projects in the US profitable.
There have been several attempts in the past for Russia and Opec to join forces to stabilise oil markets. Those efforts have never come to pass however.
Oil prices yesterday fell from one-year highs touched the previous day as there were doubts that a planned production cut would have the desired effect of reining in over two years of global oversupply.
However, Goldman Sachs said in a note to clients yesterday that despite a production cut becoming a “greater possibility”, markets were unlikely to rebalance in 2017.
“Higher production from Libya, Nigeria and Iraq are reducing the odds of such a deal rebalancing the oil market in 2017,” the US bank said, and added that even if Opec producers and Russia implemented strict cuts, higher prices would allow US shale drillers to raise output.
Carsten Fritsch of Germany’s Commerzbank said that “the expectations of an Opec production cut surely played a role” in the recent price rises of the futures market, where large volumes of new long-positions have been built up as the market becomes increasingly confident about rising oil markets.
But sounding a note of caution, Fritsch said he had “significant doubts whether they [production cut targets] will actually be fulfilled” as the rivalry between Opec members, who are fighting aggressively for global markets share, could prevent an effective deal.
And for now, supplies keep flowing, with top exporter Saudi Arabia planning to send full contracted crude volumes to key Asian buyers in November, unchanged from October levels, industry sources familiar with the matter said yesterday.
In the meantime, BP chief executive Robert Dudley said yesterday at the World Energy Congress in Istanbul he expected global oil prices to stabilise at around $55-$70 per barrel for the rest of the decade.