Russian oil producer Lukoil said it would back an extension of an agreement led by OPEC to limit production. File Photo by Calin Tatu/Shutterstock
March 16 (UPI) -- It's reasonable to give serious consideration to extending a production agreement led by OPEC, the head of Russian oil company Lukoil said Thursday.
Russia is contributing as a non-member state to an effort steered by the Organization of Petroleum Exporting Countries that aims to correct an oversupplied market through managed production declines. Russian Energy Minister Alexander Novak chaired a joint meeting with OPEC in December that called for voluntary managed declines from non-member states.
The terms of the OPEC agreement, which went into force in January, extend for six months, with the option for an extension based on market conditions. Lukoil President Vagit Alekperov said he will look for clarity on the issue when the major producers meet again later this spring.
"I think it is [reasonable to extend the agreement]," he was quoted as saying by Russian news agency TASS. "The result is obvious."
The agreement put a psychological floor under crude oil prices at $50 per barrel and oil traded in a narrow band around $55 per barrel for most of the year. Last week, that floor collapsed after major supply overhangs were reported in the United States, the world's leading economy.
The price for Brent crude oil was around $52.50 in early Thursday trading and Lukoil's president said he expected the price to level out at around $55 per barrel.
"Lukoil is pretty comfortable," he said.
The No. 2 oil producer in Russia reported net income of $786 million for full-year 2016, against a loss of $1.1 billion the previous year. Oil production for Lukoil in 2016 declined by 8.4 percent to 1.8 million barrels per day.
Russia has been a strong supporter of the production arrangement, though its actual compliance has come into question. A report this week from the International Energy Agency said compliance from OPEC members is strong, but data from the non-OPEC contributors is far less visible.
"Russia, which makes up more than half the total non-OPEC reduction, has consistently said that its cut would be gradual, and this is also the case for some other countries," the IEA stated in its report. "Provisionally, we estimate that the non-OPEC countries have cut production by 37 percent of their commitment in the first two months of the year."