In a strategic shift, Russia has opted to prioritize production cutbacks over export reductions in the upcoming second quarter, aiming for a balanced contribution to the collective output reductions of the OPEC+ alliance, as stated by Deputy Prime Minister Alexander Novak.
This move marks a notable adjustment in Russia’s approach to managing its oil supply, demonstrating its commitment to aligning more closely with OPEC+ directives.
Earlier, the country announced a significant cutback, planning to reduce both its oil output and exports by an additional 471,000 barrels per day (bpd), in agreement with certain OPEC+ participants.
Novak underscored the equitable distribution of these production cuts, with Russian oil companies set to adjust their output in alignment with their respective contributions to national production totals.
The country has outlined a phased strategy for reducing exports: starting with a 350,000 bpd reduction in output and a 121,000 bpd cut in exports for April, followed by a 400,000 bpd output reduction and a 71,000 bpd export cut in May, with June seeing all additional reductions coming from output alone.
Russia, the world’s second-largest oil exporter, had already scaled back its crude and fuel exports by 500,000 bpd in the first quarter, exceeding its initial commitment to the OPEC+ production curtailment efforts.
This latest decision to further decrease oil production rather than exports has taken market observers by surprise, with JP Morgan labeling it an “unexpected shift in strategy.”
The bank also projected that, should Russia fulfill its reduction targets, its crude production could drop to 9 million bpd by June, equaling Saudi Arabia’s output, from its current level of approximately 9.5 million bpd.
Novak articulated the rationale behind this strategic pivot, emphasizing the goal of equitable contribution among OPEC+ nations to the agreed production cuts.
He highlighted that Russia had previously focused on reducing exports rather than production to comply with the alliance’s mandates.
However, the decision has now been made to shift emphasis towards production cutbacks.
According to industry insiders, the Russian government has directed oil companies to scale down their output in the second quarter, targeting a production level of 9 million bpd by June’s end.
This directive is in keeping with Russia’s commitments under its OPEC+ agreements, ensuring that the country meets its pledged production targets.