Reduction on schedule
The OPEC+ countries agreed to cut down the level of oil production reduction in August within the previously approved schedule, said the Head of the Russian Ministry of Energy Alexander Novak at a press conference following a meeting of the ministerial monitoring committee.
"...The solution is not new. We just confirmed that we are moving in accordance with the agreement signed back in April, which implied that we should partially increase production," the minister said.
The agreement on OPEC+ countries' production reduction, concluded in early April, assumes that production would decrease by 9.7 million barrels per day (by 23% from October 2018 level) in May-June, from July it was supposed to slightly ease the restrictions to 7.7 million barrels per day (by 18%), and from the beginning of 2021 to May 2022 it was planned to reduce production by 5.7 million barrels per day (by 14%). In early June it became clear that the oil market could not recover so quickly, so it was decided to extend the 9.7 million barrels per day limit for another month, but to reach the planned schedule in August and ease the reduction to 7.7 million barrels per day.
At the same time, the monitoring committee has set a strict condition that the non-compliant countries should compensate for their low levels of reduction during the first two months of the deal in August. As a result, the total reduction in oil production in August should amount to about 8.1-8.2 million barrels per day, said the Minister of Energy of Saudi Arabia, Prince Abdulaziz bin Salman bin Abdulaziz Al Saud at a press conference.
All participants underlined that the terrible things were left behind and the oil market was gradually beginning to recover. "If in April the decline in demand for oil was 25 million barrels per day worldwide, in June we saw a decline in demand by about 10 million barrels per day," Novak said. "Increasing travel, lifting restrictions, all of this gives rise to increasing demand," he added.
"Therefore, the decision to move according to the schedule is very positive news for the oil industry," said the Russian minister.
According to Novak, Russian companies were ready for such decision, so they will be able to adjust production to the volumes approved by the reduction schedule. "Our companies will be able to meet the targets for increased production very quickly, and this will be proportionate to the quotas that were in effect in previous months. Our companies are ready and they have taken this into account in their plans and medium-term programmes," he said.
Novak said, that the total volume, which accounts for the increase in reduction for Russia, is about 400 thousand barrels per day, which is about 20% plus to the level that Russia has previously reduced.