Russia and Saudi Arabia head to this weekend’s OPEC committee meeting as the tortoise and rabbit of a global deal to cut Oil supply, with Moscow sticking to a slow and steady pace despite Riyadh’s sweet-talking.
OPEC’s de-facto leader Saudi Arabia publicly prodded the Kremlin to speed up and implement its full 300,000 barrel-a-day production cut by the end of this month, but Energy Minister Alexander Novak reiterated it won’t reach the target before April
“Confidence in the OPEC/non-OPEC deal is the most important tool to protect Crude prices,” Milan-based analyst at Intesa Sanpaolo SpA, Corsini said to Bloomberg. Adding: “Saudi Arabia will not openly criticize poor Russian compliance as it’s not in their interest to scare market participants.”
The Organization of Petroleum Exporting Countries and its allies are almost three months into the pact to take 1.8 million barrels a day off the market in a bid to eliminate a global surplus after three years of glut. After a promising start in January, Russian production flat-lined the following month and is now just over half way to the reduction that Moscow promised.
The agreement is set to last the six months through June, but several OPEC members are signaling an extension may be necessary. On Wednesday, benchmark Brent Crude dropped below $50 a barrel for the first time since November 2016 as swollen US stockpiles and rising shale production offset the impact of the cuts.
Russian output has fallen 160,000 barrels a day from the October 2016 level and will fall another 40,000 barrels by the end of this month, Novak said. He has maintained since the deal was first struck that the target will be reached no sooner than April.
The Russian cuts are “slower than what I’d like,” Saudi Energy Minister Khalid Al-Falih said in an interview with CNBC. “But I think we are patient and we will see where we are in May and take it from there.”
“Unlike OPEC, where you have only one national oil company, the Russia industry is fragmented and, therefore, its collective actions are unpredictable,” Chris Weafer, a Moscow-based senior partner at Macro Advisory explained.