Russia has reached the output level pledged by the world's largest oil producing countries, also known as the OPEC+ alliance, as the country reduced its oil production by 2 million barrels per day (bpd) earlier this month.
"The OPEC+ deal worked out and Russia has achieved the targeted indicator we agreed on, which is 2 million barrels of reduction per day," Russia's Energy Minister Alexander Novak was quoted as saying by a source with knowledge of his speech delivered at a State Council meeting.
To save the market from collapse caused by the coronavirus, the Organization of the Petroleum Exporting Countries (OPEC) and other non-OPEC oil-producing countries, led by Russia, agreed in April to remove 9.7 million barrels a day from the market through deliberate cuts lasting from May to the end of June, before easing the cuts to 7.7 million bpd for the July-December period. The production cuts agreed upon account for around 23 percent of the participating countries' production levels of October 2018.
As a part of the historic agreement, Russia pledged to slash its production to 8.5 million barrels a day in May and June from a February 2020 baseline, or by around 2 million barrels a day. The deal came into effect on May 1 with the terms set to be revised in December 2021.
Due to output cuts in other countries, global oil supply has already dropped by 14 to 15 million bpd so far, said Novak, expressing his expectations to see global crude demand and supply balancing out in the next two months.
"The OPEC + deal allowed us to reduce production evenly across all countries in a regulated way, if there weren’t a deal, the reduction in demand would not go away, a chaotic slump in demand would affect Russia," TASS quoted the minister as saying.
Along with oil demand, fuel demand is also recovering following a sharp drop brought on by the coronavirus pandemic, said the minister.
"Speaking of air transportation and gas stations, the demand at gas stations was falling by 50-70 percent, now, however, the fall amounts at about 20-40 percent," Novak reportedly said, adding that jet fuel demand has now slowed down from 40-50 percent reported in April to 30-40 percent.
In addition, the minister mentioned that gas prices in Russia had not changed since the beginning of the year, while a 1.5 percent increase in diesel prices was observed - a rate that is lower than inflation.
As an additional measure taken to protect the domestic fuel market, the Caspian region country has banned imports of refined oil products, including gasoline, diesel, and jet fuel until October 1. Russia has been considering this measure since early April after oil prices crashed and led to much cheaper refined oil products outside Russia.
Meanwhile, Kremlin Spokesperson Dmitry Peskov underscored the significance of the OPEC+ deal in avoiding negative developments in the global energy markets.
"We pointed at the fact that this is a forward-looking transaction, whose effectiveness also tends to manifest itself in the future," TASS quoted Peskov as saying on Tuesday. "In any case, it can be stated that largely thanks to this transaction now they manage to avoid a completely negative situation, a slump, in energy markets."
Oil prices dropped on Wednesday following a Bloomberg report suggesting that Russia may start easing oil production cuts after the end of June. West Texas Intermediate (WTI) crude futures fell 4.5% to settle at $32.81 a barrel while Brent crude dipped 2.5% to $35.26 a barrel.
Next month, Russia will meet with other OPEC+ partners to discuss next steps for supporting an ailing oil market.