Question marks over Russia’s compliance to OPEC+ cuts

The latest OPEC Monthly Oil Market Report (MOMR) forecasted that Russia will not fully comply with the cuts agreement during the first half of 2019. (AFP)
Updated 27 January 2019
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Question marks over Russia’s compliance to OPEC+ cuts

RIYADH: The Brent crude oil price fell slightly to $61.64 per barrel at the end of last week, amid perceptions that Russia might not be able to promptly comply with OPEC+ output cuts agreed in December.
As part of the deal, Russia agreed to cut its production by 230,000 million barrels per day (bpd) from the 11.41 bpd touched in October.
But the latest OPEC Monthly Oil Market Report (MOMR) forecasted that Russia will not fully comply with the cuts agreement during the first half of 2019.
Due to its old oil infrastructure and mature oil fields, Russia cannot promptly decrease oil production — and the market is waiting to see where its output level for the first quarter of 2019 stands.
Unlike in Saudi Arabia — where Aramco is the only state oil producer — Russia has many major oil companies. These include the largest oil producer Rosneft — which produces over 4 million bpd — along with Lukoil, Surgutneftegaz, Gazprom and others.
During the OPEC meeting in Vienna in December 2018, Rosneft announced that its oil output forecasts for the the first six months of 2019 remain unchanged. That is mainly because Rosneft aims to increase production from three new fields it launched in Siberia in 2018. This led some market participants to question not only Russia’s compliance with the new OPEC+ agreement, but also that of other non-OPEC producers.
Market participants are confused by some of the statements from Russia with regard to energy policy and compliance with OPEC+ output cuts. Unlike what is seen with OPEC producers, statements by Russia’s energy minister sometimes vary from those made by executives of the country’s oil companies.
The compliance with the agreed output cuts — in which OPEC members and other large oil producers including Russia agreed to cut their combined crude production by 1.2 million bpd from January to halt a decline in oil prices — will be key to balancing the market in 2019.
Despite question marks over Russia’s compliance with the deal, OPEC in 2018 managed the various challenges successfully and was, as a whole, able to alter its output strategy based on the market needs.


China-US trade talks ‘making a final sprint’ — state media

U.S. Treasury Secretary Steven Mnuchin shakes hands with Chinese President Xi Jinping as U.S. Trade Representative Robert Lighthizer, left, and Chinese Vice Premier Liu He, right, look on before proceeding to their meeting at the Great Hall of the People in Beijing, China February 15, 2019. (REUTERS)
Updated 16 February 2019
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China-US trade talks ‘making a final sprint’ — state media

  • US duties on $200 billion in imports from China are set to rise to 25 percent from 10 percent if there is no deal by March 1 to address US demands

SHANGHAI: Chinese state media on Saturday expressed cautious optimism over trade talks between the United States and China, a day after President Xi Jinping said a week of discussions had produced “step-by-step” progress.
Xi made the comments at a meeting on Friday with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin in Beijing, after a week of senior- and deputy-level talks.
The People’s Daily, the official paper of the ruling Communist Party, said in a commentary that Xi’s meeting with US negotiators had affirmed progress made in previous talks and “injected new impetus into the next stage of the development of Sino-US trade relations.”
The talks “have made important progress” for the next round of negotiations in Washington next week, the paper said in its domestic edition.
“It is hoped that the two sides will maintain the good momentum of the current consultations and strive to reach an agreement within the set time limit,” it said.
US duties on $200 billion in imports from China are set to rise to 25 percent from 10 percent if there is no deal by March 1 to address US demands that China curb forced technology transfers and better enforce intellectual property rights.
In its overseas edition, the People’s Daily said “zero-sum thinking and games where you lose and I win can only create losses for both. Only on a basis of mutual respect and equal treatment, through dialogue and consultation, can we find a solution acceptable to both sides.”
An English-language editorial in the Global Times, which is published by the People’s Daily, said news that China had consulted on the text of a memorandum of understanding “shows the two sides have made unprecedented progress.”
“The MOU and next week’s talks both show that the seemingly endless China-US trade negotiations, like a marathon, are making a final sprint,” it said.
The newspapers cautioned that any agreement would have to be in the interests of both the United States and China.
“There are still obstacles to be overcome, and no one should underestimate how daunting a task the two sides face trying to resolve all the differences that have long existed between them in one clean sweep,” the official English-language China Daily said in an editorial.