Private Russian oil companies support OPEC supply cut deal

Russian oil companies Rosneft and Gazprom Neft were originally reluctant to join the OPEC supply cut deal, but both were ordered to participate by President Putin. Sputnik News photo.

OPEC counts on Russian oil output cuts

Private Russian oil producers who were sceptical of OPEC’s supply cut deal are now lining up behind an extension to the pact after recent oil price increases made up for lost income.

The Kremlin will ultimately make any decision concerning Russia’s involvement in the deal, but Reuters reports a change of heart by the smaller producers in Russia is a tentative sign that oil price increases have weakened opposition to global production cuts.

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Earlier in the week, OPEC sources said that Russia and other non-cartel participants must remain part of the pact to extend the deal past June.

Russian state-owned companies Rosneft and Gazprom Neft and privately-run Lukoil make up the bulk of Russia’s production cuts. By mid-March, the companies had not met their 300,000 b/d supply cut pledge, but had cut output by 160,000 b/d and are expected to meet their commitments by the end of April.

Vagit Alekperov, Lukoil’s chief executive said last week it would be “expedient” to continue the cuts because the deal has resulted in higher oil prices.

Last year, Alekperov said there was no point in Russia doing any deal with OPEC.

Also in favor of extending the pact into the second half of 2017 is Tatneft, another Russian oil major.

“We are ready to cut production at the levels, which lead to a financial result… but without harm to future output,” the company said in emailed comments to Reuters.

Russneft, a mid-sized Russian oil company said that the company will extend cuts if it “serves Russian interests.”

“We hope the oil prices rise will offset out losses from the production cuts,” Russneft said in emailed comments to Reuters.

Russian Energy Minister Alexander Novak says it is too soon to decide on extending the OPEC deal. Novak says by April or May, it will be easier to determine if Russia should participate in the extension.

State-run Russian oil companies, Rosneft and Gazprom Neft, were initially reluctant to cut as both planned to increase output, but both have since complied with the cut following the order from President Vladimir Putin.