OPEC+ to Increase Oil Production
The decision was supported by the fact that some of the participating countries had already exceeded the established quotas, and the discipline of implementing the agreement could have collapsed. The market reaction was a moderate decline in prices. However, experts believe that against the backdrop of weakening trade conflicts and stabilization of the external environment, oil prices could recover
OPEC+ has been increasing production since July. Eight countries participating in the agreement, including Russia, Kazakhstan and Saudi Arabia, agreed to increase production by 411 thousand barrels per day. The decision was made due to strong market factors, which is reflected in low commercial oil stocks, according to an OPEC press release.
Alexey Belogoryev, Research Director at the Institute of Energy and Finance, comments:
Alexey Belogoryev, Director of Research, Institute of Energy and Finance
The market reacted to the OPEC+ decision with a drop in oil prices within 1%. Brent futures fell below $63 per barrel.
Should we expect a further decline in oil prices? And how might this affect the Russian budget with the current dollar exchange rate below 78 rubles? The opinion of leading expert of the National Energy Security Fund and the Financial University Stanislav Mitrakhovich :
— Now there is news that Trump has finally postponed part of his tariff wars.
— Yes, and oil prices are recovering. As for Russian revenues, unlike many other statistical indicators related to energy, oil and gas budget revenues are what the Russian authorities disclose. The Ministry of Finance provides information for the previous month at the beginning of each month, so we can study it. Now Russia earns less than a year ago, if we compare month to month. This is due to the fall in oil prices. Therefore, indeed, the budget will have to look for some options to compensate for the loss of revenues — perhaps by cutting some expenses. We are talking about alternative revenues. But some adjustments will have to be made. By the way, the Ministry of Finance has already proposed a revised expected cost of oil and budget deficit parameters — this is an adaptation to the new realities. In any case, even if there are certain difficulties, this adaptation will not be critical and terrible for Russia. Relatively speaking, the harm from COVID was more powerful for the Russian economy and the Russian budget.
OPEC+ notes that the planned increase in production could be suspended or cancelled entirely depending on market conditions. The next OPEC+ meeting to decide on the level of oil production in August is scheduled for July 6.
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