Russia will be able to resume its oil production to 90% of the levels it was producing prior to the pandemic, Russian Deputy Prime Minister Alexander Novak said in an interview aired on Russian television on Wednesday.
Novak attributed Russia’s ability to ramp up its oil production to the decision made by OPEC+ earlier on Wednesday. That decision saw the group agree to ease production cuts by another 400,000 bpd.
“For Russia it means that in March it will be able to additionally increase by 100,000 barrels per day again. It will enable us to restore the level of reduced volume by 90%,” Novak said.
Russia took 2 million barrels per day offline in May of 2020 as part of the efforts to restore balance to the oil markets that were saturated with inventory, with prices dipping into negative territory.
Novak said that 1.8 million barrels per day of this will be restored as early as in March, adding that Russia’s compliance has been “close” to 100%, even in December.
The March output schedule shows that Russia will be able to produce 10.331 million barrels per day on average—equal to Saudi Arabia’s share.
OPEC+’s over compliance with the production cut deal has generated skepticism in the market over the group’s future production abilities and accuracy of spare capacity figures. In December, this compliance was at 122%--raising the question in a rather tight market whether OPEC+ can actually rise to meet demand if called upon.
The issue of spare capacity is significant for a tight market. Spare capacity figures are what determine the ability of producers to ramp up production in response to market demand. As OPEC+ continues to ramp up production—albeit slowly—it is also using up its ability to respond to future demand increases that are likely to follow the pandemic.