Russian energy minister calls for shift in OPEC+ focus

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Alexander Novak argues consortium should concentrate on its market share when oil demand recovers

Russia’s energy minister, Alexander Novak, has called for the Organisation of the Petroleum Exporting Countries (OPEC) and its allies to concentrate on their market share as demand for oil slowly picks up.

Novak said: “Stocks, supply and demand balance should be closely followed but it makes sense to switch to targeting market share which belongs to OPEC+ given increase in global demand.”

According to the International Labour Organisation, around 81 per cent of the global workforce of 3.3 billion people has been affected by full or partial workplace closures as a result of the lockdowns imposed to limit the spread of Covid-19.

Demand for oil slumped with this uniformly global blow. The short-lived Russia-Saudi price war exacerbated the impact of the pandemic, with prices plunging as a result of the flooded market.

The two nations have now reconciled and agreed to a new round of production cuts to stabilise the price of oil.

Novak was keen to emphasise that Russia will be further reducing oil production by nearly two million barrels per day, 19 per cent from February levels.

The minister stated that no companies, including foreign energy firms that secured production-sharing agreements in the 1990s, will be exempted from the new curbs.

Both Saudi Arabia and Russia have been significantly affected by the Covid-19 plunge in oil prices. Russia’s annual oil output is projected to decline for the first time since 2008, falling by around 15 per cent to between 480 million and 500 million tonnes.

However, the United States has arguably suffered the most from the recent crisis. Oversupply fears, which temporarily drove benchmark US crude into negative territory, have started to subside; the American shale boom is over; and US energy firms such as Halliburton have reported billion-dollar Q1 losses.

In the short term, however, oil prices have surged in the US and globally, buoyed by receding oversupply fears. By mid-afternoon Wednesday trading,  and  crude oil futures stood up 11.68 and 25.28 per cent respectively, at $22.85 and $15.42 per barrel.

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