Despite renewed fears about oil demand due to the new coronavirus strain, the leader of the non-OPEC group in the OPEC+ pact, Russia, is still in favor of another 500,000 bpd increase in the alliance’s oil production from February, Bloomberg reported on Monday, citing officials with knowledge of the Russian oil policy.
Earlier this month, the OPEC+ group managed to avoid a no-deal outcome at its meetings, which went on for days amid disagreements over how the OPEC cartel and its Russia-led non-OPEC partners would act next year with the pandemic still depressing fuel demand in the world. Saudi Arabia was inclined to roll over the existing cuts, but several other members of the alliance, including Russia, were pushing for increased oil production from January.
The original plan for a 2-million-bpd increase of OPEC+ production as of January was watered down to a 500,000-bpd rise for January in a compromise agreement, largely seen as a positive outcome that avoided a break-up of the OPEC+ pact or even of OPEC.
The total production cut for January will thus be 7.2 million bpd, compared to the current 7.7 million bpd collective cut, while the ministers decided to hold monthly meetings to decide the oil production policy for the following month.
The producers in the pact “agreed to hold monthly OPEC and non-OPEC ministerial meetings starting January 2021 to assess market conditions and decide on further production adjustments for the following month, with further monthly adjustments being no more than 0.5 mb/d,” OPEC said at the meetings in early December.
At the monthly OPEC+ meeting on January 4 to set the production policy for February, Russia is set to support another 500,000 bpd increase, according to Bloomberg’s sources.
This suggests, on the one hand, that Russia is really looking to boost its oil production. On the other hand, it could also suggest that Russia likely believes there is room for this additional supply to the market in two months’ time, despite the virus mutation which sent oil prices plunging by more than 4 percent early on Monday, after the UK put millions of people back under a strict lockdown and many European countries suspended flights from the UK.
By Tsvetana Paraskova for Oilprice.com