Russia mulls increasing oil output up to 500,000 b/d: Novak

Moscow — Russia could potentially increase oil production by up to 500,000 b/d in the long term, although it hasn't closed the door to further cooperation with OPEC in the future, energy minister Alexander Novak said Tuesday.

OPEC and Russia failed to agree on production cuts late Friday, causing oil prices to crash by over 30% on Monday. Walking out of the OPEC headquarters, Novak declared that everyone was free to pump oil at will starting April 1.

"We have the potential for production growth. I think that in the short term we can increase by 200,000-300,000 b/d, in the long term the potential is 500,000 b/d," Novak told the Rossiya 24 news channel.

Under the existing production restraint deal between OPEC and non-OPEC producers -- set to remain in force until the end of March -- Russia's quota is 10.328 million b/d. In February, the country produced 11.38 million b/d, according to S&P Global Platts estimates.

The minister is set to meet Russian oil companies this week to discuss production plans and cooperation with OPEC countries.

Despite discord with OPEC, Novak praised the effective cooperation of the so-called OPEC+ grouping over the past three years, which he said had earned Russia Rb10 trillion ($138.9 billion).

The accumulated funds will help Russia to support the ruble after the national currency hit a four-year low on Monday, the finance ministry has said, adding that the funds will help cope with oil prices as low as $25/b for up to 10 years.

"We may reach new agreements if needed," Novak said, with regard to the possibility of new deals with OPEC+ in the future.

The next meeting of OPEC and non-OPEC ministers is scheduled for May-June, he added.

RIYADH RIFT

As for the steep drop in prices, he blamed Saudi Arabia offering discounts on oil for the crash, which "will take a few months to recover."

Meanwhile, the Kremlin too did not rule out Moscow and Riyadh returning to the negotiating table and reaching a consensus on oil production cuts.

"Cheap Saudi crude is already providing a highly competitive alternative to Northwestern European refineries as opposed to Russian crude oil, and global demand remains structurally weak," George Voloshin, head of the Paris branch of Aperio Intelligence, said, adding that the end of the US shale industry, another Russian competitor, is unlikely to happen.

"The risk Russia is facing is that it could find itself on the losing end in terms of market share as well," the analyst said.