March 11, 2020 / 2:06 PM / 22 days ago

Russia's energy minister questions Saudi decision to boost oil output

MOSCOW (Reuters) - Russian Energy Minister Alexander Novak said on Wednesday that Saudi Arabia’s plans to hike oil production and discount its crude prices was “probably not the best option” as disagreements over output policy between the two suppliers intensified.

FILE PHOTO: Russian Energy Minister Alexander Novak arrives at the OPEC headquarters in Vienna, Austria December 6, 2019. REUTERS/Leonhard Foeger

Riyadh said on Wednesday it planned to boost oil production capacity for the first time in more than a decade, a day after saying it would hike crude supplies to a record high in a battle for market share that has sent oil prices plunging.

The kingdom also slashed its official selling price (OSP) for April for all its crude grades, after OPEC’s pact with Russia on curbing supplies fell apart on Friday when Moscow rejected OPEC’s call for deeper output cuts.

“We saw a strong statement from Saudi Arabia about a decrease in oil prices for its produce. Effectively, this is an initiative to promote its production,” Novak told reporters.

“It also announced about its output increase. We believe that... this is not the best option,” the Russian minister said.

He also said Russia was engaging in phone calls with OPEC and non-OPEC members, who have created an informal alliance known as OPEC+ that has been propping up oil prices since 2016.

“We continue dialogue with OPEC,” he said, adding that a Russian representative would attend an OPEC+ technical panel scheduled for March 18 in Vienna.

Riyadh dismissed on Tuesday suggestions by some others for talks, saying discussions would not help if they simply confirmed to the market that OPEC+ could not reach a deal.

Saudi Arabia had been pushing for OPEC+ to remove an extra 1.5 million barrels per day (bpd) of supply from the market, in addition to the 2.1 million bpd that the producers had been holding back under a deal that expires this month.

After Friday’s meeting failed to reach agreement, OPEC said all limits on production would be scrapped at the end of March.

Novak said “it would be right” to keep production at the same levels as the first quarter.

“Unfortunately, our partners rejected this proposal,” he said.

Under the existing pact, Saudi Arabia has been cutting far more than its quota and much more than Russia, even though both are major oil producers alongside the United States, which has played no part in the pacts on cutting supplies.

Russian oil pipeline monopoly Transneft (TRNF_p.MM) said on Wednesday domestic oil producers had not asked for a hike in oil exports.

Reporting by Vladimir Soldatkin, Writing by Alexander Marrow; Editing by Edmund Blair

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