Possibility of Russia and Kazakhstan Exiting Oil Production Cut Agreement

Russian and Kazakh oil ministers have announced that they may exit the oil production cut agreement of the Organization of the Petroleum Exporting Countries (OPEC). These two countries, along with nine other non-OPEC countries, reached an agreement with OPEC last year to reduce oil production. The Russian state news agency Sputnik reported on Monday, July 9, quoting Alexander Novak, Russia's energy minister, that a gradual exit from the agreement made in Vienna regarding the production ceiling is 'reasonable,' but its implementation may take several months. He told reporters on the sidelines of the World Petroleum Congress: 'This may take several months. Overall, this is a reasonable action. Many people share this view.' In response to a question about whether a gradual exit from the agreement and a return to previous production levels is on the agenda, he said this matter should be discussed at a ministerial meeting. Additionally, extraterritorial restrictions do not contribute to the stability of the energy industry. These issues fall under the category of protectionism and contradict the principles of the World Trade Organization. According to him, due to political considerations, deviations in the energy policies of some countries that do not utilize clean and efficient resources, namely gas and nuclear energy, are observed. Mr. Novak added: 'In my opinion, some extraterritorial restrictions affect trade, investment, and technology.' OPEC began its production cut program at the beginning of January this year with the aim of stabilizing and increasing prices, which for the first time since 2008 limits supply to the market. In May, the Russian energy minister stated that Saudi Arabia, Kazakhstan, and Russia are committed to the OPEC agreement and will cooperate with each other to regulate the market. The Russian news agency Itar-Tass also reported on Sunday, quoting Kanat Bozumbayev, Kazakhstan's energy minister, that this country is considering a 'soft exit' from the OPEC agreement following an increase in oil production in recent months. According to this report, the Kazakh energy minister, in response to whether he prefers a soft exit from the OPEC agreement or a sharp increase in production, said 'the first option.' He announced that Kazakhstan has not yet made a final decision regarding the extension of the agreement, stating 'this matter will last until November.' OPEC will hold a meeting in November. In late 2016, OPEC and 11 independent oil producers, including Russia, agreed in an agreement with OPEC to reduce the daily production ceiling by up to 1.8 million barrels. In May of this year, the agreement was extended until April 2018, under which the production quotas of countries remain fixed.