Russia Signals When to End Production Cuts
Russia should start exiting a global deal to cut oil output if crude prices remain at $70 per barrel for more than six months, Lukoil chief executive Vagit Alekperov said on Friday as he unveiled a $2-3 billion share buyback program.
Russia and Saudi Arabia are leading the wider OPEC and non-OPEC effort to limit production to prop up prices and Brent crude oil futures have risen by more than 50 percent since mid-2017, hitting $70 a barrel this week for the first time since December 2014.
“If the price of $70 remains for more than half a year, we should start exiting smoothly,” Alekperov, who is also a major shareholder in the Russian oil company, told reporters.
Fatih Birol, head of the International Energy Agency, said that while oil prices at $65 to $70 a barrel were good for oil producers now, there was a risk it would encourage more oversupply from U.S. shale drillers.
Alekperov said a price of $60 to $70 a barrel was a comfortable level for Russian oil firms.
“We should not repeat the mistakes of 2000s when the oil price crossed over $100,” he said.
Lukoil also said it would establish a share buyback program “as an incremental mechanism to distribute capital to shareholders” and planned to cancel around 10 percent out of a total 16 percent of the treasury shares it holds.
“I think these changes will further support the growth of the company’s shareholder value,” Alekperov said.
The board has supported the management initiative to cancel the major part of Lukoil treasury shares and use the remainder in a new long-term incentive program for key employees.