Leonid Fedun, the vice president of the Russian state-owned oil company Lukoil said he would welcome production coordination with the oil cartel OPEC this week, if the Kremlin were to approve such a strategy. Reuters reports:
“In my opinion, if such a political decision is taken, Russia should jointly work with OPEC to cut supply to the market… It’s better to sell one barrel of oil at $50 than two barrels at $30,” Fedun told TASS news agency in an interview.
The Telegraph‘s Ambrose Evans-Pritchard hinted that something like this might be in the cards earlier this month, but even as Lukoil and the state-owned oil pipeline company Transneft float the idea that Russia might cut production in the near future, Moscow’s own energy outlook has it keeping production at current levels, which are close to post-Soviet records. The WSJ reports:
The Russian Energy Ministry forecasts that national oil production will remain at current levels through 2035. The International Energy Agency, a Paris-based monitor of energy trends, expects Russian oil output to stop growing this year. By 2020, Russian oil production could fall to 10.5 million barrels a day, the IEA said, and sink to 9 million barrels a day by 2040.
Still, OPEC would love to see Russia cut production, and the cartel’s Secretary-General, Abdalla El-Badri, said just this week that the global glut of crude “should be viewed as something OPEC and non-OPEC tackle together,” adding that “it is crucial that all major producers sit down to come up with a solution to this.” Russia hasn’t cooperated with coordinated production cuts in the past, but at this point, every petrostate on the planet would welcome it were one of their rival producers to reign in production, as low prices stress national budgets and put pressure on regimes.
But Lukoil won’t be the one making those production decisions for Russia—Putin will. And it’s hard to see the Russian President managing to come to some sort of agreement with OPEC when the cartel’s own members can’t trust one another enough to make any cuts of their own.