Russian oil may benefit from OPEC's transformation
The Russian oil industry is feeling the pressure to resume production caps. In fact, by sacrificing a small portion of the output, these companies can see their stocks rise.
New production restrictions may push up crude oil prices and benefit Russian producers, just as they did last year. Since the initial production agreement between OPEC and Russia two years ago, the Moscow oil and gas index has risen by more than 36%.
OPEC said that in view of the soaring US shale oil production, oil prices will fall back, and next year they will consider reducing production. According to people familiar with the matter, the Russian oil company will meet with Energy Minister Alexander Novak on Thursday to exchange views on next year's investment plan.
Alexander Kornilov, an analyst at Moscow Aton LLC, said: "History shows that we can turn production into an advantage." "If we look at how the Russian oil and gas index has changed since 2016, Russia was the first time with OPEC. The agreement to cut production has made everything clear."
According to people familiar with the matter, on Monday, Novak and Saudi Energy Minister Khalid Falih discussed the agenda of the meeting between OPEC and its allies in Abu Dhabi this weekend. The official said that although some people said that the organization would consider re-limiting supply, Russia is not ready to make such a decision.
According to Alexander Lösef, CEO of Sputnik Asset Management, any OPEC+ agreement that will stabilize crude oil prices above current levels will benefit Russian oil companies.
In June this year, Russia and OPEC reached an agreement to relax the production cap. Since then, Russian crude oil production has risen to 11.4 million barrels per day, the highest record since the collapse of the Soviet Union. The price increase was mainly driven by the state-owned oil giant Rosneft PJSC, which said this week that its production could increase by another 4% in 2019.
Regarding any new output ceiling, Raiffeisen Centrobank analyst Andre Polischuk said: "I don't think there will be much impact." He added that the year will not be worse than 2018. "For large Russian oil companies, the reality may not be as severe.