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Russian Finance Minister Anton Siluanov said Saturday that Russia and OPEC could decide to increase production to fight to conquer market share with the United States. His remarks were first picked up by the Russian news agency Tass.
Siluanov said the drop in oil prices would then have a negative impact on oil production in the United States. This argument was also advanced until the end of 2014, when the Saudis had sought to prevent US producers from going bankrupt by opening up oil production chains despite one already flooded the global market. oil.
"(If the deal is abandoned), oil prices will fall, then new investment will decrease, US production will be lower because the cost of production of shale oil is higher than that of traditional production." He said prices could fall to $ 40 per barrel or even less for a full year, adding that he had not yet made a decision on the deal and he did not know if the countries in the OPEC would be satisfied with this scenario.
Siluanov's comments are not without precedent. Russia has already hinted that it could start pumping more oil, which would force the world's second largest oil producer to cancel its participation in the OPEC + oil reduction agreement. concluded early in the year to remove 1.2 million b / b. market for six months, with a revision period after this period.
The OPEC + agreement, the second of its kind in three years, has reduced global oil supply, in addition to geopolitical developments, including reduced production by OPEC member countries. Iran, Venezuela and Libya. At the same time, world oil prices peaked in five months, increasing by 30-40% due to tight supplies. Related: US oil exports double in 2018
On Friday, Brent futures traded in London rose 72 cents, or 1%, to $ 71.55 a barrel. West Texas Intermediate (WTI) benchmark US crude oil climbed 32 cents for the session, settling at $ 53.89 a barrel – a sixth consecutive week of gains for the WTI. And despite some new bearish early this week, crude prices have remained around these levels.
Saudi Arabia remains on course
If Russia hesitates over its commitment to remain in the OPEC + agreement, Saudi Arabia says it will remain firm. Saudi Energy Minister Khalid al-Falih said two weeks ago that he was "optimistic" about the prospect of a continued commitment to reduce OPEC + production. Earlier, he said he was expecting other oil producers to "catch up very quickly."
However, the fact remains that the other producers in the agreement, including Russia, are not as committed to the agreement (with lower compliance rates) than the first agreement. OPEC + concluded in January 2017, which put OECD oil within the reach of all. inventory levels at five-year averages and price increases that fell below $ 30 per barrel in January 2016.
If Russia decides to increase its production, the Saudis would be faced with a hopeless situation. If the Kingdom retains its share of the reduction in the price of oil, it will give market shares to Russia, especially in China and other parts of Asia.
If the Kingdom also renounced the OPEC + agreement and increased its production to fight for market share, it would put downward pressure on oil prices, as much as oil production in the United States continues to progress. However, it remains to be seen whether oil prices will fall to $ 40 a barrel, as Siluanov had predicted.
By Tim Daiss for Oilprice.com
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