Russia Is Open to New Output Hike If OPEC+ Decides It’s Needed

Pipes labelled 'gas' at a gas treatment refinery in the Lensk district of the Sakha Republic, Russia. Photo by Andrey Rudakov /Bloomberg

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(Bloomberg) — Russia is open to another output hike at the next OPEC+ meeting if the alliance deems such an increase to be necessary, according to a person familiar with the nation’s position. 

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Moscow’s partnership with OPEC+ is very important and Russia will seek a solution that’s acceptable for the whole group at the meeting on July 6, the person said on condition of anonymity as the deliberations are not public. The eight OPEC+ members involved in the talks, which have been rolling back their production cuts in monthly increments, may consider another hike for August, the person said.

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Russia initially opposed a production increase proposed by Saudi Arabia at the last meeting of the eight OPEC+ members earlier this month. With support from Oman and Algeria, Moscow’s delegation argued that the group should hold output steady in July to assess the impact of previous increases. 

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Those countries eventually dropped their opposition, and the Organization of the Petroleum Exporting Countries and its allies approved another hike of 411,000 barrels a day for July, reviving idle production at an accelerated pace for a third consecutive month.

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READ: Saudis Tighten Grip on OPEC+ by Pushing Through Oil Surge

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OPEC+ has persisted with its output surge even as the global oil market sagged due to faltering Chinese demand and the economic turmoil created by President Donald Trump’s trade war. Crude plunged more than $10 a barrel to below $60 in early April after the group agreed on its first larger-than-expected supply increase. 

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Oil prices briefly surged above $80 this week as the US joined Israel’s war with Iran, but has since plunged back into the $60s amid a ceasefire. 

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Saudi Arabia wants OPEC+ to keep returning barrels as the kingdom puts greater importance on getting back lost market share, people familiar with the matter said earlier this month. For Russia, a top-three global oil producer, the benefits from increasing its own output has been eroded by a strong national currency, which reduces the ruble price of each exported barrel.

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Read: Saudis Want More Super-Size OPEC+ Hikes in Push for Market Share

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The differences seen between Russia and Saudi Arabia at the June OPEC+ meeting raised questions over the group’s unity. Both countries have since sought to dispel those concerns, with their top energy officials, Deputy Prime Minister Alexander Novak and Energy Minister Prince Abdulaziz bin Salman al Saud, appearing together in a show of unity at the opening ceremony of President Vladimir Putin’s St. Petersburg International Economic Forum earlier in June.

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At the St. Petersburg forum, Igor Sechin, Chief Executive Officer of the Russia’s largest oil producer Rosneft PJSC, praised the OPEC+ strategy of production hikes, calling the shift in the group’s policy astute.

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Russia’s oil industry is ready for another production hike in August should the government approve it, said another person, who also spoke on condition of anonymity. 

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