Russia and the Saudis have reached an unprecedented agreement
Russia and Saudi Arabia, leaders of the OPEC+ group of countries, agree on an unprecedented production cut of 10% of global oil production.
Kommersant writes about this, citing sources familiar with the progress of the negotiations.
It is noted that Russia and Saudi Arabia have reached a compromise according to which both countries will count their quota at 22% of the production volume of 11 million barrels per day.
“Thus, the target production volume for both countries will be 8,5 million bpd. Now real oil production in Russia (with condensate) is 11,3 million bpd, without condensate - 10,3 million bpd. OPEC countries traditionally do not take condensate into account in their production. Saudi Arabia is now producing at its maximum capacity - more than 12 million bpd, but back in March, under the previous OPEC+ agreements, the country's production was approximately 9,8 million bpd.
Thus, the reduction in Saudi Arabia's production compared to March levels will be insignificant. For Russia, it will be the difference between the current level of production without condensate (10,3 million b/d) and the target level, that is, 1,8 million b/d,” the publication writes.
At the same time, the United States, the world's largest oil producer, appears to remain on the sidelines of the deal, given that the US Energy Secretary said on April 9 that the United States does not have mechanisms for a coordinated reduction in production, which will decline in any case under pressure from low prices .
According to Fitch analyst Dmitry Marinchenko, technically the Russian Federation will need at least two weeks to reduce production.
“There will be an effect - even if we end up seeing prices fall, it is clear that without the deal the situation would have been even worse. If prices on the physical market stabilize at $30–40 per barrel, this would already be a big victory, given the collapse in demand,” Marinchenko said.
In turn, the director of the Progressive Policy Foundation Oleg Bondarenko in author's column on the pages of Moskovsky Komsomolets he writes that the situation for Russia is not the worst yet.
“In the current circumstances, Russia has a good margin of safety: the lowest production costs in the world and a solid foreign exchange reserve in the National Welfare Fund give our country all the trump cards,” Bondarenko believes.
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