Putin says oil supply cuts possible if all major producers take part
Vladimir Putin said a cut to global oil production of about 10m barrels a day is possible, but only if all major crude producers including the US join in the reduction pact.
The Russian president instructed his energy minister to co-ordinate with Opec and allied producer nations at an extraordinary, virtual meeting to be held on Monday focused on alleviating the supply glut and a response to the coronavirus outbreak.
Oil prices have fallen by about half due to the collapse in demand caused by the pandemic, sparking calls, led by US President Donald Trump, for co-ordinated supply cuts to try and bring the market to balance.
Russia’s participation is critical to any global agreement. It was Moscow’s unwillingness to participate in a Saudi-led round of production cuts that prompted Riyadh to launch a price war that has seen crude prices drop below $20 a barrel in recent weeks.
Mr Putin’s comments on Friday mark the first time since the talks collapsed that the Kremlin has acknowledged a willingness to re-engage on production cuts with Opec. Oil rallied on his remarks, with Brent crude, the international benchmark, settling 13.9 per cent higher on Friday at $34.11 a barrel.
“We can talk about a reduction in the volume of about 10m barrels per day, a little less, maybe a little more,” Mr Putin said at a meeting of government officials and executives from oil companies. “Of course, all this must be done in a partnership . . . we are ready for co-operation with the United States of America on this issue.”
His comments come a day after Mr Trump said that cuts of 10m-15m barrels would be possible, and that he had brokered a deal between Russia and Saudi Arabia to achieve it, an assertion that has been met with scepticism. The US, Russia and Saudi Arabia accounted for about a third of the 100m b/d of crude produced last year.
Questions remain over how any cuts might be allocated among producer countries, which nations will participate, and what any US involvement might look like. A bigger point raised by oil analysts is whether cuts will be significant enough in the face of a drop in demand that could amount to 30m b/d in April.
“You know that we are in close contact with our partners in Saudi Arabia. I recently had a conversation with the president of the United States of America,” Mr Putin said. “We are all worried about the current situation, everyone is interested in joint and — I want to emphasise this — co-ordinated actions to ensure long-term market stability.”
“We are ready for agreements with partners and within the framework of the Opec+ mechanism,” he said, referring to a three-year oil alliance between Opec, Moscow and other major crude producers that broke down last month.
Saudi Arabia launched the price war in an effort to grab market share from rival countries who cannot produce crude at such low prices. The kingdom has slashed prices and raised production to record levels above 12m b/d.
Even as Russia is now adopting a more conciliatory approach, its rift with Saudi Arabia is not yet over.
People familiar with the kingdom’s energy policy said any potential cuts would come from its new, higher baseline of production. Mr Putin said new curbs would be calculated from prior, lower levels.
Mr Putin also blamed Saudi Arabia for the collapse of the Opec+ alliance and criticised the kingdom’s recent increase in production that has coincided with a drastic cut in crude demand due to global lockdowns and travel bans.
After last month’s meeting of oil ministers, Opec officials blamed Russia for the disarray, arguing that Moscow wanted to hit at US shale companies and the broader US economy.
On Friday, however, Mr Putin sought to counter that view, saying the end of the oil partnership was an attempt by Saudi Arabia “to get rid of competitors who extract so-called shale oil”.
The drop in oil prices to $25 a barrel — levels not seen since 2002 — achieved that goal, he said, adding that Russia would be comfortable with oil at around $40 a barrel.