A further cut in new drilling suggests that Russia's oil companies are particularly hopeful for a quick rebound in demand for the commodity, despite Energy Minister Alexander Novak recently saying that he expected demand to recover to pre-pandemic levels by the 2nd quarter of next year.
"Reserves accumulated in the 2nd quarter are gradually shrinking, and we see that July and August were the first 2 months when stocks declined gradually. The reduction roughly amounted to 45 mln barrels in August and 34 [mln barrels] in July," Novak said in September.
Not all are pessimistic. One Fitch Ratings director in Russia, for example, told Bloomberg that no decision has been made yet about 2021 drilling plans, adding that local producers were flexible when it came to such plans.
Dmitry Marinchenko, however, acknowledged that if oil demand's recovery was sluggish and OPEC+ had to extend its 7.7-million-bpd production cut plan instead of relaxing it by another 2 million barrels from January, this would have a negative impact on drilling plans.
For now, the official position is support for the further relaxation of the cuts despite reports that Saudi Arabia was considering pitching a continuation of the current rate of cuts beyond December this year.
"Currently, despite the 2nd wave of the pandemic in a number of countries, my colleagues and I continue to be optimistic and expect we can gradually raise production as per the agreement without harming the market," Alexander Novak wrote in an article for Energy Policy, the energy ministry's publication.
Yet uncertainty remains heightened, precisely because of the strong resurgence of infections in some parts of the world, notably Europe. Even though it is not the biggest oil import market, the return to lockdowns would affect international trade and, therefore, oil demand. To be fair, however, national lockdowns are not on the table for now.