VLADIVOSTOK, Russia—Global oil markets remain “fragile” due to geopolitics and production declines in several regions, Russia’s energy minister said on Sept. 12, but added his country could raise output if needed.
The comments come amid oil prices eyeing $80 per barrel LCOc1, up from little over $60 in February, amid supply disruptions and expected U.S. sanctions against Iran.[O/R]
“Today, the situation is quite fragile, of course, and it is related to the fact that not all the countries have managed to restore their market and production,” Russian Energy Minister Alexander Novak said at an economic conference in the Russian far eastern city of Vladivostok.
“We observe such situation in Mexico, where the decline more than halved from the forecasts on 2018. In Venezuela production is falling quite strongly, by 50,000 barrels per day. This means that the market is still not balanced in long-term perspective.”
Venezuelan oil exports have halved over the past year to little more than 1 million barrels per day (bbl/d) as the South American country grapples with a political and economic crisis.
Novak also warned of the impact on markets of looming U.S. sanctions against Iran’s oil exports, which will be implemented from November.
“This is huge uncertainty on the market—how the countries, which buy almost 2 million barrels per day of Iranian oil will act. Those are Europe, Asia Pacific region ... There is a lot of uncertainty. The situation should be closely watched, the right decisions should be taken.”
Washington has put pressure on other countries to also stop importing Iranian oil. Despite some opposition from governments in Europe and Asia, many oil firms have already started dialing back purchases in anticipation of U.S. sanctions.
Should markets overheat and prices spike, Novak said there was potential for some countries to raise output.
“Russia has potential to raise production by 300,000 barrels (per day) mid-term, in addition to the level of October 2016.”
October 2016 was a baseline for the accord to withhold output from 2017.
For that month, Russia produced 11.247 million bbl/d, a post-Soviet record high.
Novak said a September meeting between the Middle East-dominated OPEC and a group of other non-OPEC producers, including Russia, will discuss the market situation in Algeria.
He said the meeting would discuss further oil market cooperation, taking into account supply and demand forecasts for the third and fourth quarters of 2018 and first-half 2019.
Novak also said that Russia plans to obtain a 20% share of the global LNG market thanks to abundant gas reserves.
“I am sure we will reach this goal,” he said.
Other disruptions, including bottlenecks in Canada, squeeze global supply of heavy crude.
Exports are insufficient so far to keep propane inventories manageable, but as the price continues to drop, that could change.
Oil held near 2019 highs on March 20, supported by tightening U.S. stocks and declining output from key producers due to OPEC production cuts and U.S. sanctions on Iran and Venezuela.