The rumors over a coordinated production cut between OPEC and Russia continue.
On Wednesday, the head of Russia’s state-owned oil company Rosneft floated the idea of participating in a production cut. Or did he?
Rosneft’s chief Igor Sechin, arguably the most important voice from Russia’s energy sector, said major oil producers should cooperate to remove some of the supply overhang.
"A coordinated supply cut by major exporters by around 1 million barrels per day would sharply reduce uncertainty and would move the market towards reasonable pricing levels," Sechin said on February 10 at the International Petroleum Week conference in London, as reported by Reuters. On its face, that sounds as if he is expressing a willingness from Moscow to participate. But Sechin was careful not to say who, exactly, should do the cutting.
“Who are we supposed to be talking to about cuts? Will Saudi Arabia or Iran cut production?" Sechin said to reporters when asked if Russia would participate in coordinated cuts. The FT took this as a rejection of Russia’s possible participation.
In the past, Sechin has clearly stated that Russia would not cooperate with OPEC on production cuts, saying that it could outlast other competitors in a downturn. It is also difficult for Russia to turn its oil fields on and off, especially in winter. Sechin has laid the blame for the oil price crash at the feet of OPEC and U.S. shale before, although at this week’s conference he was more measured.
Separately, Sechin also dismissed the long-term viability of U.S. shale, noting that elevated output would be a temporary phenomenon. "Shale oil production has its limitations in scope and time ... U.S. shale oil production will reach its peak in 2020," he said.
In short, Russia appears no closer to cooperation with OPEC than before, despite the support for such a move from other oil executives in Russia. Without a clear statement from Russian President Vladimir Putin, the markets may continue to react to comments from figures such as Sechin.
By Charles Kennedy of Oilprice.com