CEO of Russia’s state-owned oil major Rosneft Igor Sechin has written to President Vladimir Putin saying Moscow should pull out of the production cuts deal with OPEC as it is a strategic threat and plays into the hands of the US, Reuters reported on February 10.
The letter did not say whether the agreement in place since 2017 between the Organisation of the Petroleum Exporting Countries (OPEC) and other large oil producers led by Russia to cut output should be extended or not, reports the agency, which has seen a copy of the letter.
The letter was a clear signal to other senior Russian officials involved in energy policy that Sechin wants the deal to come to an end, according to two well-placed industry sources, Reuters reports.
Analysts say that Putin may ignore Sechin’s letter as the Kremlin is in the midst of trying to undermine US influence in the Middle East and Saudi Arabia in particular needs the production cuts to bolster oil prices, without which its budget runs at a deficit. Sechin is more narrowly focused on Rosneft’s profits.
“The letter is a threat to the deal extension. But anyway, Putin is the ultimate decision maker,” one of the sources said.
The so-called OPEC+ deal has helped oil prices double to more than $60 per barrel. It has been extended several times and, under the latest deal, participants are cutting output by 1.2mn barrels per day (bpd) until the end of June.
OPEC and its allies will meet on April 17-18 in Vienna to review the pact.
The US, which overtook Russia and Saudi Arabia as the world’s biggest oil producer last year, is not participating in the output cuts.
US crude oil output is expected to rise to a record of more than 12mn bpd this year and climb to nearly 13mn bpd next year, the US Energy Information Administration said on Tuesday.
Russian oil production was 11.329mbd in January, down slightly from a record 11.4mbd in December.
Sechin has consistently opposed the OPEC deal, saying it has allowed US clout to rise significantly.
“The participants of the OPEC+ agreement have actually created a preferential advantage for the US — that sees raising its own market share and the seizure of target markets as its primary task — which has become a strategic threat to Russia’s oil industry development,” the letter seen by Reuters says.
“The key strategic challenge, which the domestic oil industry is faced with today is the further decline in Russia’s market share, despite the availability of quality recoverable oil reserves, necessary infrastructure and personnel,” it said.
Rosneft, Russia’s largest oil producer, has been the main contributor to the country’s share of cuts. Rosneft has signalled that its oil production may increase by 3% to 4.5% this year, subject to OPEC agreements.