Russian oil production is on track to hit a post-Soviet record, despite Energy Minister Alexander Novak reiterating his country’s commitment to a two-year output freeze.
Russia will produce 548 million tonnes of oil next year, according to a statement from the government on Friday, with output jumping by almost 4 percent in September from the previous month to hit 11.11 million barrels per day.
However, Novak reassured markets that Russia would work with OPEC and Saudi Arabia to negotiate an output freeze to curb this year’s weak oil prices. Russian officials have said that Moscow are more likely to agree to freeze oil production rather than agree to an outright cut, despite its capability to increase oil output by a further 4 million barrels per day.
Neil Beveridge of Bernstein Energy said in a note to clients:
“The near term fundamentals in the oil market have turned positive. Demand is stabilizing, OPEC production has peaked (and will fall if cuts are implemented), and global inventory declines imply that the market is more balanced than many believe.”
Oil prices have hit record lows over the past year as excess oil flooded the markets. This situation has been exacerbated by the lifting of sanctions against Iran, leading to Iranian oil re-entering the market and contributing further to oversupply issues.
Since the beginning of the year the Organization of the Petroleum Exporting Countries have tried to agree an output cut amongst its member countries, but efforts have largely been frustrated by tensions between Iran and Saudi Arabia and Russia’s unwillingness to participate. In recent months, however, all three countries have been more committed to working towards an output freeze.
OPEC is set to hold its next meeting in Vienna on November 30th, where the plan to cap oil production will be discussed further.