Russia doesn't want OPEC+ to cut oil output as it fears it'll lose leverage with its Asian buyers: report

Russian President Vladimir Putin attends a cabinet meeting via videoconference in Moscow, Russia, Wednesday, Aug. 31, 2022.

Gavriil Grigorov/Sputnik/Kremlin Pool Photo via AP

• Russia is opposed to any cut in oil output, the WSJ has reported as OPEC+ meets Monday to discuss supply. 
• Moscow is worried a cut could weaken its hand in talks with Asian buyers, per the WSJ.
• Saudi Arabia floated the idea of production cuts last month, but analysts expect no change from OPEC+. 

Russia is opposed to an oil production cut from OPEC+ as it wants to make sure it has an edge in discussions with Asian buyers that have been snapping up its discounted crude, according to a Wall Street Journal report.

The Organization of the Petroleum Exporting Countries and its allies meet Monday to discuss whether any changes to crude supply are needed. Leading exporter Saudi Arabia raised the idea of a supply cut last month, saying recent trends have undermined the market's price functions.

Moscow is worried that an output reduction by OPEC+ could be taken as a sign that global supply of crude is outpacing demand, the WSJ reported Monday, citing people familiar with the matter. That could weaken its hand in talks with Asian buyers that have picked up its oil exports after Europe and the US put bans on Russian supplies.

A surplus of crude combined with falling demand would typically drive oil prices lower. That scenario was signaled at a recent OPEC+ meeting, sources told the WSJ, where the group projected global oil supply would be about 900,000 barrels a day above demand this year and next. 

Still, analysts believe OPEC+ will maintain crude output at its current levels at the meeting today. 

Russia's economy is heavily reliant on its energy exports, and oil and gas revenues made up 45% of its federal budget last year, according to the International Energy Agency.

Its oil exports have remained strong despite Western sanctions, thanks to a successful pivot toward the likes of China and India. Buyers there have taken advantage of price discounts on Russian crude to step up their volumes of imports, and there are reports the US is among countries importing Russia supply via India.

Russia has been reeling in significant revenues from oil and gas sales, which helped its current-account surplus hit $167 billion from January to July this year. That's more than a triple what it was a year ago.  

Meanwhile, the G7 group of advanced economies has agreed to back a price cap on Russian oil, and it is now urging the likes of India to support the US-led plan.

Brent crude futures were up 2.74% at last check Monday to trade at $95.58 a barrel, while WTI crude futures climbed 2.56% to $89.01.

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