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Russia credits OPEC+ for oil industry confidence

On the fifth anniversary of the OPEC+ agreement of December 2016, Alexander Novak, Russia’s Deputy Prime Minister, said that the deal had helped increase the confidence to invest in the industry.

Speaking during an interview on Rossiya 24, a Russian TV channel, Novak said:

“We positively assess the joint actions since 2016. They allowed us to return investments and restore confidence in the industry. This is a strategically longer period for planning our activities.”

Prior to the 2016 deal, the oil industry had been dealing with a supply glut that led to oil and lubricant producers like BP, Shell and Exxon Mobil trying to make a profit by selling oil below $50 per barrel. OPEC then joined forces with a number of non-member oil producers, most notably Russia, to limit production and bring balance to the markets.

Nevertheless, the arrangement has not always been a smooth one. Novak said to Rossiya 24 that the March 2020 meeting was particularly difficult, with the various countries failing to agree how they should respond to the challenges caused by the COVID-19 pandemic. Following a price war between Saudi Arabia and Russia, the OPEC+ group came to the conclusion that huge production cuts would be needed to rebalance the markets.

While the OPEC+ agreement has certainly help stabilise the markets during a challenging period, more investment is needed to return to pre-pandemic levels. Mohammad Barkindo, OPEC’s Secretary General, recently warned that underinvestment in new oil and gas supplies risked creating energy shortages and market imbalances in future.

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