Russia's Top Oil Producer Sees Risk of Shale Neutering OPEC DealBy , , and
Rosneft CEO Igor Sechin comments at forum in St. Petersburg
Low crude prices are here for a long time, Sechin says
Russia’s most powerful oil boss said the deal between OPEC and its partners to curb output won’t stabilize the crude market over the long term as U.S. shale fills the supply shortfall.
“A decrease in production under an agreement between OPEC and non-OPEC could largely be balanced out by an increase in U.S. shale oil production by the middle of 2018,” Rosneft Oil Co. PJSC Chief Executive Officer Igor Sechin said at the St. Petersburg International Economic Forum.
Sechin, a close ally of President Vladimir Putin, expects shale oil output to increase by about 1.5 million barrels a day in 2018, close to the entire cut targeted by the Organization of Petroleum Exporting Countries and its allies including Russia. While OPEC and its partners agreed on May 25 keep output constrained through to early 2018 in a bid to clear a global glut, the Rosneft CEO said non-participants such U.S. shale are using the deal to strengthen their market position.
“The agreement between OPEC and non-OPEC countries, with the biggest contribution from Saudi Arabia and Russia, has given the market a breather, but it’s hard to consider these as systematic measures that would lead to long-term stabilization,” Sechin said on Friday.
The OPEC pact has locked in the slump in crude and low prices will prevail for a long time, the CEO said.
Brent crude fell 3.1 percent as of 11:19 a.m. in London, bringing its loss to more than 9 percent since OPEC ministers sat down in Vienna to discuss extending their deal.
Production cuts by OPEC and its partners are taking longer than expected to eliminate the surplus as U.S. shale drillers boost production with surprising speed. American oil explorers, having learned to operate more efficiently during a two-year market slump, have restored almost all the output lost during the downturn.
Russia is unlikely to prolong its supply deal with OPEC beyond the nine-month extension agreed last week, because by then it will have served its purpose, Oleg Vyugin, a Rosneft board member, said on Thursday.
Rosneft, Russia’s largest oil producer, has borne the brunt of output cuts under the extension deal. OPEC Secretary-General Mohammad Barkindo and Russian Energy Minister Alexander Novak said Wednesday that they are looking for ways to formalize a permanent alliance among oil producers to take more control of oil markets.