Russia’s push to increase oil production came independently, the country’s oil minister said Saturday during the OPEC summit in Vienna, dismissing the suggestion that public pressure from the U.S. played a role in its decision.
OPEC ministers announced a deal on Friday that will increase oil supplies from the producer group, which has been capping output in order to balance the market and boost prices for the last 18 months. But the lack of clear output targets left markets confused.
Ahead of the oil cartel’s meeting this week, President Donald Trump used his Twitter account to prod OPEC into ramping up production, as fuel prices in the U.S. have soared ahead of the summer driving season. In many parts of the U.S., gas prices have steadily climbed to around $3 per gallon, a pain threshold that can eat into consumer spending.
When asked if tweets by the president urging OPEC to keep prices down factored into the country’s move, Alexander Novak told CNBC’s Steve Sedgwick that “the US is just another consumer, like the rest of consumers, and when we make decisions we take into account the interests of the consumers, not just those of producers.”
The minister added: “I would like to stress that our offer to increase production volumes in June was made well before the appearance of certain tweets. I’d like to note that Russia had proposed to ease the quotas back at the end of last year, and we began to discuss in detail in February this year.”
The comments followed the news that OPEC and non-OPEC members, including Russia, have reached a compliance agreement to raise oil output by one million barrels per day (bpd) in order to balance supply and demand in the second half of 2018.
Russia, the world’s largest oil producer, came to the meeting hoping to put 1.5 million bpd back on the table. But the agreed upon figure should be “sufficient” for the time being, Novak said.
“We have concluded, and I’d like to say it was a consensual decision, that 1 million bpd of easing production cuts at the current stage should be sufficient,” the minister said. “But once again, we are not limiting ourselves to a firm decision. We are getting back together in September to discuss what possible other steps could be needed.”
The agreement came after a week of tense negotiation at OPEC’s headquarters in Vienna, Austria. Top OPEC producer Saudi Arabia faced the challenge of convincing a handful of reluctant producers including Iran, Iraq and Venezuela to support an output hike.
As an ally of Iran, Russia had to engage its diplomatic efforts to bring the Islamic Republic to the table. But this was par for the course in a 14-country cartel whose members have competing priorities, Novak said.
“We have a lot of countries and, quite naturally, a lot of diverse interests. Yet given that the ultimate goal is rather important for all, we manage to find these balanced decisions, these sensible resolutions and solutions,” he told CNBC.
However, Novak stressed that sanctions imposed on Tehran by the Trump administration were not helpful, and would create difficulties for the market ahead.
“Sanctions never lead to any good, there is no doubt about it,” the minister said. “We think that introduction of such sanctions restricts competition in global markets. It does not stabilize the overall situation and therefore does not ensure future energy security.”
With regard to Washington’s latest sanctions on Iran following the U.S. pulling out from the 2015 Iran nuclear deal, Novak said that his government and OPEC would have to “wait and see” how the situation develops, in terms both oil prices and regional tensions.
“We would then need to decide what actions to take, if any, both OPEC and non-OPEC countries, following from the current market situation.”
—CNBC’s Sam Meredith contributed to this report.
