Reports that Russia plans to start easing oil production cuts after the end of June arrested the oil price rally, keeping WTI below $35 a barrel.
WTI slid 0.3 percent following the news, after gaining more than 3 percent yesterday. This added to worry about U.S.-Chinese relations after the U.S. threatened to impose sanctions on China for its policy towards Hong Kong.
The Bloomberg report, which cites unnamed sources familiar with Moscow’s position on the cuts, stands in stark contrast with a Reuters report, which also cited unnamed people familiar with the Russian position, who said Moscow was in fact considering an extension of the current cuts.
Russia is meeting with its OPEC+ partners next month to discuss future steps, with Energy Minister Alexander Novak saying that he expected the oil market to rebalance by July. The remark suggests Russia might indeed be ready to ease the cuts, which have capped its production at 8.5 million bpd. On the other hand, there are way too many questions around the rate of demand improvement for comfort, so extending the production cuts is certainly on the table.
According to reports from last week, Russia is almost complying with its share of the cuts, with its crude oil production averaging 8.72 million bpd in the first three weeks of May, as per Reuters estimates. This is close to the 8.5-million-bpd quota, especially considering Russia’s far-from-perfect track record in complying with the cuts.
In a separate positive sign for oil markets, Bloomberg noted that Nigeria and Algeria had increased their official selling oil prices, indicating they expected improved demand soon.
Meanwhile, demand is recovering in two key markets: China and India. India’s Energy Minister Dharmendra Pradhan said demand for oil would rebound to pre-crisis levels next month while in China, IHS Markit said it expected May demand to reach 92 percent of pre-crisis levels.
