Why Russia Wants To Renegotiate The OPEC+ Deal

Russian oil companies prefer to keep their production restriction quotas until March, when the current OPEC+ cuts expire, and discuss an extension then, signaling that Russian producers don’t want deeper cuts or any major changes to the pact at next week’s meeting.

“We all proposed that we stay in the deal with the same quotas, and at the end of the first quarter we will meet and discuss,” Ravil Maganov, Vice President at the second-biggest Russian oil producer, Lukoil, said after a meeting with Energy Minister Alexander Novak on Thursday to discuss the Russian firms’ view on the OPEC+ deal.

Last week, Lukoil’s chief executive Vagit Alekperov said that he expects the OPEC+ group to decide next March whether to roll over the production cuts through the rest of 2020.

“It is going to be decided in March,” Alekperov said last week, as carried by Reuters, referring to the ongoing production cuts which OPEC and its Russia-led non-OPEC partners are implementing in a bid to rebalance the market and prop up oil prices.

After the meeting with the Russian oil companies, minister Novak, in one of his typical ‘I’m-not-giving-away-anything’ statements, told reporters that Russia’s position going to the Vienna meeting next week “is still a secret.”

But the market expects the OPEC+ coalition to come up with some sort of concrete decision next week—otherwise analysts expect a sell-off in oil.

The Saudis are said to be pushing non-compliant OPEC members to fall in line and start keeping their respective quotas.

The Russians have a grievance about the pact that they are likely to take up with their OPEC allies. Russia is expected to discuss with its OPEC partners the exclusion of gas condensate from its cap, as condensate isn’t exported, while it is included in Russia’s oil production statistics, Novak said last week.

Speaking on Thursday, Novak said that Russia hasn’t asked OPEC+ yet to exclude gas condensate from the calculations. Russia tries to fully comply with the cuts, but it is unable to do it because of increased gas condensate production, the minister noted.

By Tsvetana Paraskova for Oilprice.com

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