Russia stepped up its price war with Saudi Arabia by warning it can raise oil production, while also saying further cooperation with OPEC is possible.
After the collapse of OPEC+ talks last week, Russia could increase output by as much as 500,000 barrels a day in the near future, Energy Minister Alexander Novak said on Tuesday. His statement came just minutes after Saudi Aramco escalated the battle for market share by pledging record oil shipments in April.
The OPEC+ union, forged by Russia and Saudi Arabia in 2016 to support oil prices, collapsed last week when Novak refused to be strong-armed by the Saudis into accepting additional output cuts of 1.5 million barrels a day. The failure of the talks has prompted Saudi Arabia to slash its crude prices, targeting potential buyers of Russian oil in Asia, Europe and the U.S. In response, oil slumped by the most in three decades on Monday.
Despite this escalating battle for market share, Novak said Russia is open to further cooperation with Organization of Petroleum Exporting Countries and its allies.
“I want to say that the door isn’t closed,” Novak told the state-run Rossiya 24 TV channel, in his first public appearance since the March 6 OPEC+ meeting. “If needed, we have various tools, including reducing and increasing production, and new agreements can be reached.”
OPEC+ has meetings scheduled for May or June, when the union may evaluate the market situation once again, he said.
In the meantime, Russia’s oil industry is regrouping for a potential output hike from April 1, when the current OPEC+ deal expires, Novak said. The nation’s producers have the capacity to raise the output by 200,000 to 300,000 barrels a day in the short term, and by as much as 500,000 barrels a day in the near future, he said.
Oil rebounded on Tuesday after Monday’s historic crash. Brent crude was trading 7.5% higher at $36.93 a barrel at 10:26 a.m. in London.
Russia produced 11.289 million barrels a day of crude oil and condensate in February, according to preliminary data from the Energy Ministry’s CDU-TEK unit. Raising the level by another half a million barrels would bring the nation’s output to an all-time high. Still, Russia will not be able to match the production hikes planned by the Saudi kingdom within the next two months.
Saudi Arabian Oil Co. on Tuesday pledged to raise its April production above the maximum sustainable capacity to a record 12.3 million barrels a day, in a move to flood the market with crude and put additional pressure on Russia.