Alexander Novak recalled that the OPEC+ nations, which have been cutting production to stabilize the market, agreed today to extend the deal till the end of 2022, but five countries will have a possibility to increase production additionally from May 2022
MOSCOW, July 18. /TASS/. Oil production in Russia will reach the pre-crisis level in May 2022, Russian Deputy Prime Minister Alexander Novak said on Sunday.
“It was decided to increase [oil] production to the pre-crisis level. As for Russia, we will reach the pre-crisis level already in May 2022,” he said in an interview with the Rossiya-24 television channel.
He recalled that the OPEC+ nations, which have been cutting production to stabilize the market, agreed today to extend the deal till the end of 2022, but five countries – Russia, Saudi Arabia, the United Arab Emirates, Kuwait, and Iraq – will have a possibility to increase production additionally from May 2022.
“We agreed on a monthly increase in oil production by 400,000 barrels a day in all countries that are members of the OPEC+ deal,” he said.
The increase will depend on the baseline – the level from which the production quotas are calculated. It will be increased by 0.5 million barrels a day, to 11.5 million barrels a day for Russia and Saudi Arabia, from 3.17 to 3.5 million barrels a day for the United Arab Emirates. Baselines for Kuwait and Iraq will be raised by 150,000 barrels a day, to 2.959 million and 4.803 million barrels a day, respectively.
“It will also give us a possibility to increase production in the second half of 2022,” Novak stressed.
The OPEC+ new decision will make it possible for Russia to increase oil production in 2021-2022 by 21 million tonnes, Novak said. “It [the OPEC+ decision] will make it possible for us to increase production by 100,000 barrels starting from August. This is quite a big volume that will give us an additional output by about 21 million tonnes this and next year,” he said in an interview with the Rossiya-24 television channel,
According to Novak, Russia will be able to increase oil production in the second half of 2022 thanks to a higher baseline production, which is used to calculate production cuts, by 500,000 barrels a day, i.e. from 11 million to 11.5 million barrels a day.
He noted that under the new terms of the deal, Russia’s oil output will reach the pre-crisis level in May 2022. However, he added, the deal may be adjusted at the next OPEC_ meeting on September 1, if the market situation changes.
Anyway, Russia and other OPEC+ nations see the market situation positively. “We observe growing demand for oil and oil products amid active vaccination campaigns across the globe. We observe increased activities in terms of motor transport shipments and air service. The forecast for the global economy growth has been adjusted to 5.53-6% this year,” he said.
“These are the positive factors facilitating the market recovery. Today, we see shortages on the market, that is why this decision has been taken,” he added.
The OPERC+ new decision will make it possible for Russia to earn an extra of 400 billion rubles (5.4 billion US dollars) in budgetary revenues in 2021-2022, Novak said.
“If the [oi] price is around 60 US dollars per barrel, additional budgetary revenue will exceed 400 billion rubles. It is a positive factor as it will help restore investment activities, including in our oil sector. It will mean additional order for the industry, additional incomes for Russian regions,” he said in an interview with the Rossiya-24 television channel.
According to the Russian deputy prime minister, the decision to increase oil production was taken, among other reasons, due to the shortages of oil and oil products. It will help stabilize the market. Another reason was an adjusted global economy growth forecast up to 5.5-6% However, he added, the deal may be adjusted at the next OPEC+ meeting on September 1, if the market situation changes.
Export of oil is one of the key sources on Russia’s budgetary revenues. Initially, the oil production cuts deal was agreed amid the extremely low oil prices provoked by falling demand and oversupply. The deal has helped to keep the oil price.
The current market situation is different, with growing demand and shrinking supply, Novak stressed.
“Today’ meeting once has once again demonstrated our commitment to constructive talks with an aim of reaching a consensus. Although the pandemic is not yet over, we see that thanks to active vaccination across the globe the demand for our products is growing,” he said. “That is why it is important today to be responsible and give possibilities for economic recovery in the world.”.
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