OPEC Could Compensate for Reduced Russian Oil Production

Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries (OPEC) could compensate for reduced Russian production influenced by sanctions imposed by the West on Russia due to its invasion of Ukraine.

Moscow may agree to compensation, but the decision may not be adopted at Thursday’s meeting, and the lost Russian production may not be fully compensated, said a source in OPEC+, familiar with the Russian position.

– In the end, an agreement on compensation could be reached –  but perhaps not at the meeting – he stated.

A source from a Gulf country, a member of OPEC+, asserted that it is ‘very possible’ that a decision will be made precisely at the meeting that begins in the afternoon.

Russia already failed to meet its assigned quota in April, producing about 9.3 million barrels per day, about one million barrels per day less than planned.

Some estimates indicate that Russian production and exports could decrease by two to three million barrels per day due to sanctions, notes Reuters.

The Financial Times reported on Wednesday, citing sources, that Saudi Arabia is ready to increase oil production if significantly fewer barrels come from Russia.

Discussions have taken place regarding increasing production in Saudi Arabia and the United Arab Emirates in the very short term, and a decision could be announced at the OPEC+ meeting, the London daily reported, citing a diplomatic source.

The production increase scheduled for September would be moved to July and August, the source said.

Saudi Arabia, the largest producer in OPEC, once rejected calls from Washington to produce much more than agreed at the OPEC+ level.

Riyadh is now ready to meet those requests and increase production to bring oil prices down from their current high levels, informed sources said. They are also prepared to increase it in the event of a supply crisis, the sources noted.

The change in Riyadh’s stance coincided with the announced visit of U.S. President Joe Biden.

U.S. diplomats have been preparing for weeks for Biden’s first visit to Saudi Arabia, which is expected to ease strained relations due to issues with U.S. arms deliveries, the war in Yemen, and the murder of journalist Jamal Khashoggi.

According to a briefed source, Washington wants concrete plans from Saudi Arabia and the United Arab Emirates regarding increasing oil production before Biden’s potential visit to Riyadh and participation in the Gulf Cooperation Council summit, Reuters reports.

OPEC’s unused capacity is not particularly large and, according to some estimates, does not reach even two million barrels per day.

– There is not really a surplus of oil in the market that could replace the potential loss of Russian barrels – concludes SEB analyst Bjarne Schieldrop.