The OPEC/non-OPEC production cut agreement put a floor under oil prices and has significantly benefited Russia’s budget and companies, Russian Energy Minister Alexander Novak said on Thursday, according to S&P Global Platts.
The price of the commodity could have dropped to $25 a barrel if OPEC and its Russia-led non-OPEC allies hadn’t started to curtail production in 2017, Novak said at the Russian Investment Forum in Sochi today.
Without the OPEC deal, oversupply would have been significant, inventories today would have been much higher than the five-year average, and the pressure on prices would have been significant, the Russian minister said.
“The mathematics is simple: a 2% cut in crude output resulted in a nearly 100% increase in price,” Novak said.
Novak’s remarks come days after reports emerged that Igor Sechin, the chief executive of Russia’s largest oil producer Rosneft, had written a letter to president Vladimir Putin, arguing that Russia should quit the OPEC+ deal, which, according to Sechin, threatens Russia’s market share while it benefits the United States.
Novak, while not commenting on those reports, said that the deal has significantly benefited Russia’s budget revenues and companies over the past two years.
In the past two years, the OPEC/non-OPEC deal has poured in additional $89.6 into Russia’s budget, while companies have received $30-$37 billion, Novak said at the Sochi forum, noting that those estimates are very conservative and based on an oil price premium of $10 a barrel from the production cut deal.