Russia has reduced oil production not because of the agreement, but because of problems with sales due to sanctions.
In the spring of 2020, the OPEC+ alliance made a historic decision to cut oil production by almost 10 million barrels per day. This decision at one time helped to stabilize the market, after which the alliance began to gradually ease restrictions. In general, the process went according to plan until February 2022 arrived. Due to the unstable situation around Russia, oil prices began to rise – and grow faster than originally planned.
Now, at the ministerial level of the OPEC + countries (including Russia), it was decided to increase production by 648 thousand barrels per day in July, and the same amount in August. This is one and a half times more than the previously agreed increase in production volumes. Now OPEC+ restrictions will end in August not in September. Under the new terms, Russia and Saudi Arabia will be able to produce 10.83 million barrels of oil per day in July.
However, another problem arises here – in April Russia was forced to reduce production by 860 thousand barrels per day – to 9.16 million. Currently, Russia is producing a million barrels per day less than the agreement allows. That is, Russian oil companies did not even choose the quotas that the country had before the new easing of restrictions. And whether they will be able to win back the growth of allowable volumes is an ambiguous question.
By the way, of the OPEC+ countries, only Saudi Arabia and the United Arab Emirates are able to increase production – the rest simply do not have the necessary capacities. This is partly due to the nuances of oil production – the restoration of production from wells takes longer than its reduction. As a result, in April 2022, cumulative production at the OPEC+ level was 2.6 million barrels per day lower than the deal allowed (and Russia “provided” 1 million barrels).
Experts fear that the easing at the OPEC+ level Saudi Arabia and the UAE will benefit primarily, starting to produce more. This will slightly reduce world oil prices, which will play into the hands of the United States (which is not involved in the deal at all) – allowing to reduce the prices of oil products, which have skyrocketed due to sanctions against Russia. And Russia will eventually end up with the same production volume, lower prices and an almost complete European embargo on oil supplies.
However, Russian Deputy Prime Minister Alexander Novak believes that the pace of oil production will allow Russia to restore production as much as possible – in May, volumes increased compared to previous months, and even more growth is expected in June. The problem in this case will not be with oil production, but with its use – export opportunities are sharply reduced, and Russian refineries are already loaded.