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OPEC and Russia, a heavyweight, could fight against America for its share of the oil market, said Russian Finance Minister Anton Siluanov on Saturday at TASS, even if it meant breaking the OPEC and bring down oil prices.
OPEC and Russia have reduced oil production in line with the agreed production cut agreement, but the US continues to increase production and gain market share in the process, market shares held previously by OPEC members and other non-OPEC signatories the agreement, including Russia.
Any failure in the production reduction agreement will, however, have a negative impact on prices and could theoretically plunge prices into the territory of $ 40 per barrel. That, in turn, would hurt US oil producers and hurt new investments, Siluanov said.
"(If the agreement is abandoned), oil prices will fall, then new investment will decline, US production will be lower, because the cost of production of shale oil is higher than that of traditional production."
Siluanov's comments allied with warnings of an impending global economic recession. "The risks of a future global recession are very high," said the Minister of Finance. "We are ready to change global energy prices – we have prepared the budget, the reserves and the balance of payments. We created this kind of system.
Russia has been penchant for the OPEC + production cut agreement and has long been sending conflicting messages about their agreement. And as US production grows and its market share increases, the weight of OPEC diminishes, underscoring the importance of its relations with Russia. Related: Environmentalists' concerns are exaggerated
OPEC production has fallen below its commitment. In the United States, however, production continues to increase and is currently at a record 12.2 million bpd, according to the EIA. Before the conclusion of the initial production cut agreement in December 2016, oil production in the United States was 8.77 million bpd, a significant increase that undeniably exerts pressure on oil production. on all the countries that have reduced their production.
President Vladimir Putin, however, assured markets Tuesday that Russia would continue its cooperation with OPEC. "We will monitor the market closely, but we will continue our cooperation with OPEC," Putin told TASS, before continuing with a more ambiguous fighter.
"If the market situation evolves in such a way that reserves increase significantly or if the United States seizes Venezuelan oil and rapidly increases their accessibility in world markets, a positive event will occur in Libya in terms of the situation. Libya will enter the world market. or if someone thinks that it is necessary to stop pressuring Iran and that Iran enters the market with additional volumes, then we will have to take into account all this and make the appropriate decision. "
Under the OPEC production reduction agreement, Russia has agreed to reduce from 230,000 b / d to 11.191 billion b / d.
By Julianne Geiger for Oilprice.com
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