Vladivostok — Russia's energy minister Alexander Novak believes the countries taking part in the OPEC-led production cut deal are capable of increasing the combined crude output further to cover potential shortages in the market and expect oil prices would likely correct down in the upcoming winter season on lower demand.
The comments came amid concerns that OPEC-led alliance may not be able to offer new extra barrels to the markets to cover potential deficit that may appear in coming months, as the US sanctions on Iran come in full force in November, while production at some countries like Venezuela continues to fall.
"There is a fairly significant combined potential by the countries [participating in the deal] that can increase production and this potential can be used if necessary," Novak said Wednesday.
"I don't know what deficit you're talking about," he told reporters on the sidelines of the Eastern Economic Forum.
Novak said he does not see risks of oil supply shortages in the near term due to seasonal factor as demand is to reduce in winter.
Seasonal factors are also likely to help avoid potential increases in oil prices, Novak said, even though he believes that the oil market remains "fragile" and the Iran issue adds a "huge uncertainty" to the market.
"I don't forecast too high prices. To the contrary, I think the price can be corrected down, taking into account [upcoming] low demand season, while currently we are still in the high demand summer level," Novak said.
On Tuesday, Novak did not rule out that the OPEC-led group might ease further production cut caps should the market situation demands more barrels to cover potential deficits.
He however, declined to say what proposal Russia is prepared for the group's Joint Ministerial Monitoring Committee, which is to gather on September 22-23 in Algeria.
"The situation has been changing and we need to give a serious estimate of the current stand of affairs and also supply and demand forecasts for the next six months in Algeria," he said, adding that the technical committee of the group is preparing such a study.
RUSSIA'S POTENTIAL
Russia has the potential to boost crude production by 300,000 b/d from the October 2016 level to around 11.547 million b/d within a year, but the actual output dynamic will depend on companies' investment plans and economic feasibility, Novak said earlier in the day.
He said the potential estimate does not mean that volume will actually be produced, and warned against taking this estimate as an action plan.
"This does not mean that such actions will be taken. This is my estimate, but any estimate is subject to updates based on the market conditions in which a company operates," he said.
"No decisions have been taken so far to this effect," he added.
If Russian oil producers decide to use in full its production potential, the country's crude production will hit new record highs. Russia produced a record 11.247 million b/d of crude and condensate in October 2016, before it started reducing production within the OPEC-led production cut deal.
Russian increased output by around 250,000 b/d from May's level, following a decision by the OPEC-led production cut alliance to return some 1 million b/d to the market through maintaining the 100% compliance to the initial deal, contrary to significant overdoing previously.
Under the original deal in force since January 2017, the group agreed to cut the combined output by 1.8 million b/d to help the market balancing. This included Russia's commitment to cut the output by 300,000 b/d from its October 2016 output of 11.247 million b/d.
