Global output cuts spur Russia’s oil revenues
The country’s average oil revenues have increased by a third since the end of 2016
Although Russian oil producers have repeatedly spoken out against oil production cuts, the country’s cooperation with OPEC has turned out to be profitable. This year, Russia’s average earnings have surpassed those of Saudi Arabia. Since 2016, the latter has carried the lion’s share of cuts, while the Kremlin has been much more cautious.
Russia has earned more money this year from the OPEC+ deal than Saudi Arabia, reports Bloomberg, adding that the kingdom has carried a greater share of the burden of production cuts. According to the latest oil market report of the International Energy Agency (IEA), Saudi Arabia has cut production by around 740,000 barrels a day since the deal was signed at the end of 2016. That is almost ten times higher than Russia’s average daily output cuts of 75,000 barrels, reads the report.
However, the Arabian state has received just three quarters of the additional financial benefit enjoyed by Russia. This year, Moscow has earned an average of $670 million a day in gross crude oil revenues, which is $170 million a day more than in the last quarter of 2016. Riyadh has been earning $630 million a day since the beginning of 2019, a $125-million increase compared to the fourth quarter of 2016.
The two states have driven close cooperation between OPEC and a number of other oil-producing nations. At the same time, Saudi Arabia has been especially persistent pushing for coordinated output cuts to fight oversupply, while Russian authorities have been more cautious, mostly expressing their consent to further production cuts only just before the previous agreement expires. The country’s major oil producers have repeatedly criticised the deal claiming that it may hinder their expansion plans, while Russia’s market share may be taken by the US with its cheap shale. The extension of the deal serves Saudi, rather than Russian, interests, said CEO of Rosneft Igor Sechin last June.
Last week, President Vladimir Putin said that Saudi Arabia was urging all OPEC+ members to stick to their production targets under the deal because of the upcoming initial public offering of Saudi Aramco, the kingdom’s state-run oil company. “They have their current interests, and we have to respect that, and this is what we are doing” as part of the OPEC+ cooperation, the president said.
Russia’s economy is heavily dependent on hydrocarbon and mining industry revenues. According to Goldman Sachs Group Inc, the current restrictions running until March 2020 are expected to decrease the country’s annual economic growth by 0,5 per cent. Last year, the nation’s GDP added 2,3 per cent.