The agreement on OPEC+ oil production cut in the new climatic realities may become indefinite, Leonid Fedun, vice president and board member of Lukoil, a Russian oil producer, said in an interview with RBC, Report informs.
He noted that the OPEC+ deal is there ‘for a long historical perspective,’ but ‘in the context of new climatic realities, it may even remain forever.’
Last year, amid the COVID pandemic, prices for Russian Urals crude oil fell four times, to $18 per barrel, and futures for US WTI oil fell below zero for the first time in history. Participants in the oil market ‘managed to walk along the edge’ and ‘avoid a catastrophe,’ said Fedun. He added that if the market doesn’t adjust in the crisis due to the coronavirus pandemic, it can be ‘extremely painful and sad for all participants.’
Fedun reminded that thanks to the OPEC+ deal, which made it possible to adjust the market and remove excess oil from it, Russia received in incomplete 2020 year more than $26.78 billion of additional revenues. ‘There is no alternative to market regulation by cartels,’ he said.
Earlier, Fitch estimated the additional revenues of Russian companies and the budget from the increase in world oil prices as a result of the OPEC+ deal at $30-$40 billion.
The renewed OPEC+ agreement is in effect from May 1, 2020. Due to the fall in oil demand caused by the pandemic, the alliance in May last year cut its production by a record 9.7 million barrels per day. Depending on the market situation, OPEC+ is adjusting production restrictions as part of the deal. So, for this April they amount to 6.9 million barrels per day.
Since May, OPEC+ has agreed on a further reduction in the volume of reduced production - to 6.55 million barrels per day, from June - to 6.2 million, from July - to 5.76 million. Considering the voluntary contribution of Saudi Arabia and the gradual withdrawal from it, the restrictions of the alliance in April are 7.9 million barrels per day, in May - 7.3 million, in June - 6.6 million, and in July - 5.76 million barrels per day.