Russia will not be proceeding with oil production cuts, in line with OPEC’s decision to avoid cutting oil production. The news was confirmed by Russia’s deputy PM, Igor Shuvalov. OPEC agreed this week that it would roll over its 30 million barrels daily ceiling, to a figure that is more than one million above its own original estimates for next year’s total oil demand. Pending the announcement, oil prices plummeted and hit a new 4-year low. North Sea Brent dropped by 3 per cent on the day of the announcement.
Russia remains one of the largest producers of oil, with the sale of oil and gas making up 50 per cent of its annual budget, which balances at an oil sales price of $100. The recent drop in prices has hit the country’s economy hard, and at a time when the prospect of recession is already high.
The Russian government believes that one of the main drivers behind the lower prices is that a number of Arab oil producing nations are working to squeeze shale oil out of the global market. Accordingly, Russia will not reduce its output. The USA’s shale boom has also had a profound effect on the world oil market and has served to dampen prices.