OPEC and the OPEC+ countries consented to implementing production cuts after the onset of the world economic shutdown due to COVID-19. And Russia and OPEC managed to set aside their price war, at least for the time being, for the global common good. It was agreed that the OPEC+ countries would reduce their production by roughly 10 million barrels per day (bpd). Russia agreed to cut its crude oil production by 2 million bpd, or 19% of what their production levels were in February of this year.
Russia Could Continue Production Cuts Through September
Russia’s Energy Minister, Alexander Novak, met Tuesday, May 26 with their domestic oil companies to discuss the possibility of extending Russia’s production cuts beyond June. This was merely the first in a series of meetings planned with the oil companies in an effort to keep up a continuing assessment of the global oil market. It is believed no decision was made as to whether or not the cuts will be extended. Kommersant Daily, a national paper published in Russia, multiple sources claim that Russia might continue the cuts through September of this year.
The Cuts Have Helped
Alexander Novak seems to be taking a wait-and-see approach when it comes to what Russia will do next. Earlier in the week, he said he expects global oil demand and supply to balance itself possibly as soon as July. Reuters also reports, “Kremlin spokesman Dmitry Peskov also said the deal on global oil production cuts agreed last month had definitely proved effective and helped ward off negative scenarios on oil markets.”
Another OPEC Meeting Could Change Things
As of now the other OPEC+ countries are planning an ease on production cuts after June, taking the amount cut from roughly 10 million bpd to roughly 8 million bpd. That number is supposed to stay in place until December. However, there is another OPEC and OPEC+ meeting planned in June, so it is possible that the number, the dates or both may change again soon.