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Freeze of oil output will help reduce excess of oil supply twice — Russian Energy Ministry

February 19, 15:37 UTC+3
Russia’s First Deputy Energy Minister Alexey Teksler noted that the United States, Brazil and Mexico will hardly join the oil production freeze agreement
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© Vladimir Smirnov/TASS

KRASNOYARSK, February 19. /TASS/. Russia does not plan to cut its oil production but is ready to ‘freeze’ it in 2016, First Deputy Minister Alexey Teksler said on Friday.

"This is not so, we have process specificities [of production]. We have our own interests and therefore we were governed by January [figures] when making the decision [to support the production ‘freeze’ - TASS]. It means we do not plan to cut production," the official said.

According to Russia’s Central Dispatch Department of Fuel and Energy Sector, Russian oil companies produced record-breaking 534 mln tonnes in 2015, up 1.4% year-on-year.

Russian oil companies plan to maintain oil production in 2016 at the last-year level, Energy Minister Alexander Novak said earlier.

Teksler stressed that agreement on oil production "freeze" will help to reduce the excess in oil supply twice.

"If today there is about 1.8 million barrels of excessive supply than if the agreement is implemented properly when it comes into force, about half of it [the volume of excessive oil supply - TASS] can go," he said.

"The agreement will produce an effect even without Iran but Iran, in my opinion, can also be interested in agreements of such kind," the official said.

 The official noted that the United States, Brazil and Mexico will hardly join the oil production freeze agreement.

"Any country may join such an agreement. However, we are realists and understand what countries will take part in it. Many countries among those you mentioned will not obviously deal with that," the official said responding to the question whether the United States, Brazil, Mexico and Norway may join the oil freeze agreement. Teksler refused to mention any specific countries.

The deputy minister also pointed out that the average annual oil production in Russia in 2016 could grow by 1.5%.

"The agreement on freezing oil production on the level of January - which for us is higher than the average figure of 2016. We are going to specify this figure, which is approximately a little over 1.5% against last year, but we have definitively clarify the number," he said.

According to the official, the oil price of $ 35-40 per barrel will allow Russian oil industry to move forward.

"I believe that if we focus on the oil price of $ 35-40 per barrel, this will allow Russian oil industry to the steadily move forward this year," he said, answering a question about the critical oil price.

From the summer of 2014 to the present day, the price of Brent crude oil has fallen by 70% to $33.6 per barrel. Since the beginning of this year, the barrel of Brent fell by 12.5%. On Friday, the price of the Brent crude oil futures contract for April delivery on London’s ICE fell by 2% to $33.6 per barrel.

The Russian budget for 2016 is based on the oil price of $50 per barrel.

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