BOFIT Viikkokatsaus / BOFIT Weekly 2018/26

At the end of 2016, Russia agreed with OPEC and a number of other oil-producing countries on a regime of voluntary production ceilings to support higher crude oil prices. The original deal called for limiting production by a total of 1.8 million barrels a day. Unlike earlier voluntary pacts, the countries have scrupulously upheld the deal and last year agreed to extend the agreement to the end of 2018. OPEC figures show Russia's total oil production (including gas condensates) rose by 0.2 % last year to 11.1 million barrels a day. Russia's energy ministry reports that 2017 production totalled 564 million metric tons, a 0.1 % decline from 2016.

OPEC production (particularly Venezuela) has fallen well below the agreed ceilings, which in turn has bolstered oil prices. Last Friday (June 22), OPEC's council of ministers affirmed the arrangement would remain in place as earlier agreed. Producer countries were given the opportunity to increase output to reach the initially agreed production ceiling. In practice this is likely to indicate that Russia and Saudi Arabia could increase their combined production by about 1 million barrels a day. Russian energy minister Alexander Novak said that Russia could increase its oil output in the second half of this year by about 200,000 bpd.