WSJ: OPEC weighs suspending Russia from oil-production deal

Some OPEC members are exploring the idea of suspending Russia’s participation in an oil-production deal as Western sanctions and a partial European ban begin to undercut Moscow’s ability to pump more, OPEC delegates said.

Exempting Russia from its oil-production targets could potentially pave the way for Saudi Arabia, the United Arab Emirates and other producers in the Organization of the Petroleum Exporting Countries to pump significantly more crude, something that the U.S. and European nations have pressed them to do as the invasion of Ukraine sent oil prices soaring above $100 a barrel, according to The Wall Street Journal.

Russia, one of the world’s three largest oil producers, agreed with OPEC and nine non-OPEC nations last year to pump more crude each month, but its output is now expected to fall about 8% this year. It couldn’t be determined whether Russia would agree to an exemption from the deal’s production targets.

So far, there is no formal push for OPEC to pump more oil to make up for any potential Russian shortfall, but some members in the Persian Gulf have begun planning for an output increase sometime in the next few months, delegates said.

OPEC’s 13 members and 10 non-OPEC producers led by Russia are set to meet on June 2, when they are expected to approve a planned increase of 432,000 barrels a day—part of a series of incremental monthly increases designed to bring production back to pre-pandemic levels. Together, the OPEC and non-OPEC producers call themselves OPEC+.

The U.S. and European nations have said the deal isn’t enough to stabilize an oil market during Russia’s invasion of Ukraine, but OPEC+ has refused, sticking with a plan blessed by Moscow.

A spokeswoman for Russia’s energy ministry said she wouldn’t comment until the OPEC+ meeting on June 2.

While Russia isn’t a member of OPEC, it has coordinated oil production since 2016 with the group in a coalition that controls more than half of the world’s crude output, giving Moscow sway over the oil market. The pact is called the Declaration of Cooperation, or DoC, among members.

Now, OPEC members, including within the cartel’s core group of Persian Gulf producers, have started to debate whether Moscow might have to stop participating in the group’s planned increases, delegates say. Russia’s production has fallen since President Vladimir Putin launched the Ukraine invasion, and will likely drop further, according to Russia’s own projections.

European Union leaders took a big step in the economic fight against Moscow over its invasion of Ukraine by agreeing to block 90% of Russian oil imports by year-end. The embargo faced opposition from countries highly dependent on Russian crude, especially Hungary.

OPEC delegates said they began talking about an exemption for Russia before the European Union agreed to ban Russian crude purchases, with some exceptions, and block insurers from covering its crude. However, the ban has accelerated talk about dealing with Russia’s lagging output.