One and a half years before OPEC and its allies sit down and discuss how to proceed with the production-cut pact, the leader of the non-OPEC partners, Russia, sends mixed signals about the willingness to continue to take part in the delivery agreement .
This is nothing new for Russia, which had drawn its feet to support each of the former manufacturing trades with OPEC ever since the parties decided to manage global oil prices and oil prices starting in January 2017. After 2017 , before each meeting, comments and hints of top Russian officials, including Vladimir Putin, the oil market, came, and analysts just enjoyed Moscow playing ball this time.
It did every time.
At the meeting in December 201
Now that we are approaching the date of the revision of pact 25-26. June, Russia sends mixed signals again about its commitment to the agreement again.
Not that OPEC's members send unlimited signals either.
The US faced a major challenge for the cartel and Allied Pact by ending all sanctions for Iranian oil buyers, leaving the organization and market guessing just how much supply will be lost from Iran to June and beyond, and how much other OPEC members -the ones with extra production capacity like Saudi Arabia and the UAE must potentially pump to compensate the lost Iranian barrels.
Saudi Arabia says it is prepared to meet all market demand for oil and which always "works against market stability", but has pointed out that it would not hurry to run up production until it sees the actual barrels coming out of the market.
However, OPEC's task of estimating global oil supply in the future has become more difficult by increasing the uncertainty over Russian oil supplies to Europe via the Druzhba pipeline, expectations of further production declining in Venezuela, and the possibility of an interruption in Libya, which is in the midst of a civil war with rival armies fighting for the capital Tripoli.
In the midst of all this, Russia sent several ambiguous messages to the market last month. Firstly, Finance Minister Anton Siluanov said that OPEC and Russia may choose to fight for market share against the US, although this means terminating the OPEC + agreement and sending oil prices significantly lower.
At the end of last month, Putin said he hoped the Saudis would not break their promises under the OPEC + agreement, adding that he had not heard of anyone indicating willingness to terminate the agreement. Related: STEO: Burned to Average $ 70 This Year
For Russia itself, it has struggled to reduce oil production to the agreed level under pact.
Russian oil companies have touched the production cuts because the OPEC + agreement has been made with their production growth plans. Russia's companies benefit from higher oil production and do not need oil prices as high as Saudi Arabia, for example, to balance the budget.
True, Russia's budget has benefited from the higher oil prices due to limited production from OPEC + but higher production is also important for Russian companies whose goal is to develop new oil fields and counteract declines from ripening fields in the Urals region and West Siberia.
Russia's oil companies believe that production is as important as the oil price, Alexei Kalachev, an analyst at the Moscow-based investment company Finam, Petroleum Economist said.
Russia's position on the OPEC + agreement is unlikely to be known for the day itself with the meeting with OPEC in late June, so that the market and analysts will continue to speculate on the fate of the covenant for another half and a half hours. This time, Russia can decide that time has come to start developing new oil fields and ditches.
Nevertheless, Putin can decide that cosmic up to OPEC and its de facto leader Saudi Arabia could continue to give Russia additional power in global oil management, without being part of a formal organization. Saudis are the ones who need the higher oil prices, and Russia can continue to play ball to secure further geopolitical leverage.
By Tsvetana Paraskova for Oilprice.com
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