Putin sees no need for rapid oil output hike in response to price jump

The latest oil price jump stemming from the Iran-Israel conflict does not demand a rapid policy response, and Russia expects to continue determining its oil output rates in coordination with its OPEC+ partners, Russian President Vladimir Putin said June 20.

Putin, at the St. Petersburg International Economic Forum, acknowledged the sharp increase in oil prices since the onset of direct aerial hostilities between Iran and Isreal, but he said the roughly $10 increase was not overly significant in the view of Russian experts, and for the time being OPEC+ partners would continue with previously agreed gradual increases.

He stressed the importance of Gulf producers Saudi Arabia and the UAE within OPEC+, and their ability to respond in case of need.

Speaking of the OPEC+ group's decision to increase output in recent months, Putin said, "Currently it's true that by agreement -- gradually -- supply is being increased. But it's gradual, so as not to create a disbalance on the world market, so as to ensure -- as we always say -- a balance between supply and demand, and a fair price, comfortable for both supply countries and consumer countries.

"Of course we see today's situation in the Middle East -- the situation in relation to the conflict between Iran and Israel led to a certain increase in prices. But this increase in the view of our experts isn't significant -- now it's $75/b and it was $65 -- it increased by $10 and stabilized at that level.

"Many countries, including Gulf countries, can increase production and increase supply to the world market, but as a rule we do this on an agreed basis, and I hope that's how it will continue," Putin said. "The UAE makes a very significant contribution, and the crown prince of Saudi Arabia takes a very responsible approach. Our decisions have always been balanced. We'll see how the situation develops. For the time being, a rapid reaction is not needed."

Putin's remarks followed comments June 19 by Saudi Energy Minister Prince Abdulaziz bin Salman at the same event, in which he dismissed as hypothetical a question about how Saudi Arabia would respond if Iranian oil output went offline as a result of the conflict.

"I don't have an answer," he said. "We only react to realities. But if anybody gives a question that is not relating to reality today, I fail to see [how] we could predict things and how we relate to it. Plus, we are not two countries running OPEC+."

Saudi Arabia and Russia are the two largest producers in OPEC+, pumping 9.14 million b/d and 8.98 million b/d, respectively, in May, according to the Platts OPEC+ Survey from S&P Global Energy. Saudi Arabia accounts for the majority of the alliance's spare crude capacity, at over 3 million b/d, with Russia's ability to rapidly increase output more limited.

Iran is a fellow OPEC+ member, pumping 2.24 million b/d of crude in May, according to the latest Platts Survey, but it is not subject to a quota due to years of US sanctions and has seen its influence within the group wane, analysts say.

The latest conflict between Israel and Iran, which began June 13, has targeted primarily domestic oil and gas infrastructure -- as well as nuclear and military targets -- including the South Pars gas field and storage facilities near Tehran. Meanwhile, Iran has taken Israel's Haifa refinery offline.