The head of top Russian oil producer Rosneft criticised OPEC policy on Tuesday and warned lower oil output as a result of falls in crude prices may lead to a supply shortage as early as the fourth quarter.
Oil prices collapsed in 2014 in a decline that deepened after the Organization of the Petroleum Exporting Countries, a producer group of which Russia is not a member, in November chose not to cut its own output.
“OPEC has lost its teeth,” Rosneft Chief Executive Igor Sechin said through an official translator at London’s IP Week, an annual industry event. OPEC’s decision to let prices fall had led to a “destabilisation” of the market, he said.
The 12-country OPEC shifted strategy by moving to retain its market share, which has been eroded by rival supply sources such as U.S. shale oil.
“The share of OPEC is pretty stable at around 39 per cent,” Sechin said. “This organisation lost the unity of its members and in some cases is not respecting of some of its members.”
OPEC ministers and delegates have blamed non-OPEC producers such as Russia, Mexico and Kazakhstan, as well as U.S. shale oil production, for the oversupply in the market.
When OPEC, led by Saudi Arabia, decided against cutting output when it last met in November in Vienna, some OPEC ministers suggested the cartel could act only in tandem with non-OPEC producers such as Russia to help balance the market.
Sechin was part of a Russian delegation that travelled to the Austrian capital, where he held talks with a number of officials from OPEC and outside the group. But no agreement on cutting supply was reached, OPEC left its output steady and prices fell further.
Russia is the world’s biggest oil producer and its output hit a post-Soviet high at an average 10.58 million barrels per day last year, but Western sanctions over Ukraine and low prices threaten what is the country’s key source of revenue.
The International Energy Agency on Tuesday issued a medium-term outlook that predicted the U.S. oil sector would largely ride out the drop in prices, while Russia would likely be the industry’s “top loser”.
Sechin also said oil market fundamentals did not tally with the recent sharp drop in prices.