MOSCOW (Reuters) - Russia’s economic growth in October was negatively affected by a global deal between members of OPEC and Russia to curb crude oil production, Russia’s economy minister said on Thursday.
Maxim Oreshkin’s comments are the first by a senior Russian official giving a negative assessment of the deal, in which Russia joined OPEC and others in cutting output from January by about 1.8 million barrels per day (bpd) to end a supply glut.
The minister was speaking a week before Russia and the Organization of the Petroleum Exporting Countries meet in Vienna to discussing an extension of the pact to curb output, possibly to the end of 2018. It is now due to expire on March 31.
Under the deal, Russia agreed to cut output by 300,000 bpd from its level in October 2016.
“Because of the OPEC deal we have a negative direct impact from oil production, as well as indirect effects related to low investment activity due to production limits,” Oreshkin said.
Russia’s oil-dependent economy grew 1.8 percent year-on-year in the third quarter of 2017, slowing from 2.5 percent in the second quarter, the best annual rate since the third quarter of 2012, data showed this month.
Oreshkin and other officials have said the economy was on track to grow by more than 2 percent after two years of recession. But data on retail sales and other areas have raised questions about the durability of the recovery.
Oreshkin told reporters that annual inflation in Russia had slowed to 2.4-2.5 percent, adding that the ministry retained its full-year inflation forecast of up to 2.8 percent.
Russian Energy Minister Alexander Novak said on Monday Russia would determine its position on a extending the oil pact later in November. OPEC meets in Vienna on Nov. 30.
Top crude exporter Saudi Arabia has been lobbying oil ministers to agree to a nine-month extension at next week’s meeting, people familiar with the matter told Reuters.
Brent crude futures LCOc1 have climbed above $60 a barrel for the first time since mid-2015 thanks to the oil pact, helping Russia’s economy which depends heavily on oil and gas revenues.
But, if oil stays in the $60-$65 range or higher, Russia would be unlikely to support a deal extension for fear the spike would be followed by a damaging fall, said Chris Weafer, a senior partner at Moscow-based Macro-Advisory strategy firm.
“Moscow has had to deal with the economic and social consequences of two recent oil price collapses, in 2008-09 and from 2014,” he said in a note this week.
“The damage from a third collapse would likely greatly outweigh the financial gains to be made from higher oil in the meantime,” he wrote.
Reporting by Darya Korsunksaya and Vladimir Soldatkin; Writing by Andrey Ostroukh and Vladimir Soldatkin; Editing by Edmund Blair