Oil in Global Economy Series: Is OPEC deal unravelling as Russia increases production?

Are changes coming to the production ceiling agreement reached between OPEC members and participating non-OPEC countries led by Russia?

Last month Iran’s oil minister Bijan Zanganeh said that his country would push for changes in the OPEC production agreement at the next OPEC meeting, which is scheduled for June and the latest report from Russian energy ministry suggests that the oil giant has started increasing production, which is a sort of a breach of the OPEC/N-OPEC agreement, which was first reached in November 2016.

According to data by the Russian Energy Ministry, Russian oil production in March was 46.39 million tons, or 10.97 million barrels per day (bpd), up from 41.85 million tons in February, or 10.95 million bpd. The production increase is first of its kind since December 2017 and it pushes the Russian production slightly above the agreed level as per the OPEC/N-OPEC agreement. As per data, the two largest Russian producers, Rosneft and Lukoil, both increased production by 0.1 percent compared to February.

Russian energy minister Alexander Novak reiterated Russia’s commitment to the OPEC agreement but acknowledged that the country’s compliance declined to 93.4 percent in March, though he attributed the drop to the domestic market seasonality. Novak, however, said that Russia would remain committed to the agreement in 2018 and in 2019 if need be.