OPEC could ease production cuts as early as March 2020

Russian energy minister considers lifting restrictions in first quarter

Recent oil production restrictions agreed by the Organisation of Petroleum Exporting Countries (OPEC) and its allies might end in the first quarter of 2020, says Russia's energy minister Alexander Novak.

In an interview the morning of December 23, Novak, the energy minister for the second largest oil exporter in the world, observed that restrictions to oil output could be eased as early as March 2020.

Novak told Russia RBC TV: “We can consider any options, including gradual easing of quotas, including continuation of the deal. Everything will depend on how the situation develops in March and on the forecasts for the following quarters... At the moment, the situation is more or less stable on the market.”

Earlier this month OPEC and its allies agreed to reduce total oil output by 1.7 million barrels a day, a heavier restriction than most analysts and commentators had forecast.

Saudi Arabia spearheaded these heavy measures hoping to prepare a soft landing the IPO of the state-backed oil and gas giant Saudi Aramco. The kingdom had already individually reduced production by 461,000 barrels more than it had pledged to at the start of the year.

These measures were broadly successful, with Aramco receiving 4.7 times the number of subscriptions than originally desired, becoming the most profitable publicly traded company in the world and attaining a $2tn valuation within a fortnight.

Following the success of the IPO it is possible that other powers within and adjoining the organisation will lobby for an easing of production cuts.

Russia could indeed lead this call having this year broken its oil output record, 560 million tonnes, or 1.25 barrels per day. The Eurasian power has also scored a major strategic victory by constructing the majority of its Nord Stream 2 pipeline across the Baltic sea before US sanctions could kick in.

Indeed, it is also possible that Russia could go its own way from the organisation. Novak stated that collaboration with OPEC will continue as long as it is “effective and brings results, until the market requires it.”

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