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Russia Applauds OPEC Accord But Says It Will Maintain Output

Russian Energy Minister Aleksandr Novak welcomed the OPEC production curb agreement but said Russia intends to maintain its current output.

Russian Energy Minister Aleksandr Novak has praised the OPEC oil cartel's agreement to curb production but signaled that Russia intends to keep output at its current record levels.

"Everything will depend on the macroeconomic situation and companies' plans, but we are looking to keep current production volumes at the achieved level," he said on state television on September 29, one day after the Organization of Petroleum Exporting Countries agreed to trim production by about 750,000 barrels a day.

"It was a very positive decision," Novak said. The agreement "will allow to lower price volatility...I think we can see already today that the market reacted positively."

The price of premium crude jumped by over 7 percent to $49.24 a barrel in London trading since the agreement was announced on September 28.

Novak credited increased "flexibility" shown by Saudi Arabia, OPEC's biggest producer, for making the agreement possible.

For the first time since 2014, Riyadh indicated it was willing to cut its own production to achieve OPEC's lower production target of 32.5 million barrels a day, allowing archrival Iran, as well as Nigeria and Libya, to keep raising output that has been held back by international sanctions and insurgencies.

Analysts credited Russia, as well as Algeria and Qatar, for helping break the impasse between Saudi Arabia and Iran over curbing production.

Novak openly pushed to allow Iran to raise its production back to levels around 4 million barrels a day that prevailed before sanctions were imposed in 2012. Sanctions on Iran's oil sector were lifted in January of this year.

Perhaps more importantly, Russian President Vladimir Putin last month came out in favor of reaching an agreement with OPEC to freeze production with an eye toward bolstering oil prices and the critical revenues that the Russian government derives from oil taxes.

Putin then met with Saudi Deputy Crown Prince Mohammed bin Salman at the G20 summit in China in early September. After that meeting, Riyadh and Moscow jointly announced they were working on a production agreement to prop up oil prices.

Russia is the largest oil exporter outside OPEC and in September produced crude at an average of 11.1 million barrels a day, compared with 10.7 million in August, reaching a new post-Soviet record high, according to Bloomberg.

Novak said that Russia is willing to consider freezing output at different monthly levels, although "undoubtedly, September would be the month that objectively would suit us best."

Novak said Russia would like to see prices climb to the $50 to $60 range from the $40 to $50 range, an increase he said "would allow to satisfy both the interests of producers and consumers."

While asserting the Russia hopes to maintain its current output levels rather than cut back production, he said Moscow will continue to work with OPEC, which is expected to seek cooperation from producers outside the cartel like Russia and Mexico once it nails down the details of its own production agreement in the next month.

"Russia will closely examine the propositions that will be finalized and we will hold active consultations, talks with our colleagues, over these months," Novak said.

With reporting by AFP, Bloomberg, and TASS
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