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A month and a half before OPEC and its allies sit down to discuss how to proceed, the head of OPEC's non-member partners, Russia, sends mixed signals about his willingness to continue take part in the process. supply contract.
This is not a novelty for Russia, which supported each of the previous production agreements with OPEC since the parties decided to join to manage the global oil supply and supply. oil prices from January 2017. After 2017, each meeting is anticipated. , comments and hints from top Russian officials, including Vladimir Putin, have left the oil market and analysts have only guessed that Moscow would play ball this time.
He did it every time.
At the meeting of December 2018, when the current agreement to reduce oil production was concluded, that is Putin – through the intermediary of his Minister of Energy, Alexander Novak – who has spoken separately with each of the ministers of Saudi Arabia and Iran and convinced them to formulate the supply agreement. so that Iran votes in favor of the agreement, because OPEC needs a unanimous vote to make its decisions.
Now that we are approaching the date of the revision of the pact, from 25 to 26 June, Russia is again sending contradictory signals as to its commitment to the agreement.
Not that OPEC members send unambiguous signals either.
The United States has launched a major challenge to the supply pact between the cartel and the allies by ending any sanctions exemption for Iranian oil buyers, leaving the organization and the market time to guess at what the Iranian offer would be lost until June and after, and so much more. Other OPEC members – those with spare production capacity such as Saudi Arabia and the United Arab Emirates – will have to potentially pump to make up for the lost Iranian barrels.
Saudi Arabia has stated that it is ready to meet all market demand for oil and, as always, "is working for market stability", but reiterated that it would not rush to increase production as much as possible. that the barrels would not turn away market.
OPEC's task of estimating future oil supply in the world has been made more difficult by the growing uncertainty about Russian oil supplies to Europe via the Droujba pipeline, forecasts of further declines of production in Venezuela and the possibility of a breakdown in Libya, which is ongoing. in the middle 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. First, Finance Minister Anton Siluanov said OPEC and Russia could choose to fight for market share against the US, even if it meant foregoing the OPEC agreement + and significantly reduce oil prices.
Then, at the end of last month, Putin said he hoped that the Saudis would not keep their promises under the OPEC + agreement, adding that he had never heard of people willing to give up this agreement. Related: STEO: Brent at $ 70 this year on average
Russia itself is striving to reduce its oil production to the level agreed in the pact.
In addition, the Russian oil companies have been reluctant to reduce their production because the OPEC + agreement mingled with their plans for growth in production. Russian companies benefit from higher oil production and do not need oil prices as high as Saudi Arabia, for example, to balance their budget.
While Russia's budget has benefited from rising oil prices due to limited OPEC production, increased production is also important for Russian companies that want to develop new oil fields and offset the decline in oil prices. maturing fields in the Urals region and western Siberia.
Russian oil companies believe that production is just as important as oil prices, said Alexei Kalachev, an analyst at Finam Investment Company, based in Moscow, Petroleum Economist.
Russia's position on the OPEC + agreement is unlikely to be known until the day of the meeting with OPEC at the end of June. The market and analysts will continue to speculate on the fate of the pact for another month and a half. This time, Russia may decide that the time has come to start developing new oil fields and abandon the pact.
Still, Putin could decide that the rapprochement with OPEC and its de facto leader, Saudi Arabia, could continue to give Russia additional power in the global management of oil supplies without being part of 39, no official organization. The Saudis are the ones who need higher oil prices and Russia could continue to play ball for additional geopolitical leverage.
By Tsvetana Paraskova for Oilprice.com
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