Putin voices support for OPEC, sees no need to cut production

Brent would have to fall into the $50s per barrel before it again becomes a serious topic in Russia, Weafer tells NE.

- Advertisement -

Russian President Vladimir Putin reportedly said on November 15 that Moscow is committed to continuing its cooperation with the Organization of Petroleum Exporting Countries (OPEC) and is satisfied with current oil prices of around $70 per barrel. Russia Energy Minister Alexander Novak signaled earlier that Russia did not believe the oil market would face serious oversupply next year.

On November 15, Brent crude futures rose 50 cents to settle at $66.62 a barrel. US West Texas Intermediate (WTI) crude futures rose 21 cents to settle at $56.46 a barrel, Reuter reported, adding that on November 13, US futures marked their steepest one-day loss in more than three years due to ongoing worries about weakening global demand and oversupply. WTI also posted a record 12th straight decline.

OPEC is reportedly considering a cut of up to 1.4 million barrels per day next year to avoid an oil price crush.

Chris Weafer, senior partner at Macro-Advisory in Moscow, reminded that, as was expected, Russia voiced support for OPEC at the meeting on November 11 but did not agree to take part in further production cuts. “That is an option which remains open in the future but, in reality, the price of Brent would have to fall into the $50s per barrel before it again becomes a serious topic in Russia,” he told New Europe.

He explained that the Russian government’s balance sheet is in much better shape today than it was in 2016. The budget looks set to record a surplus of over $20 billion even after the recent price dip, he said.

“The federal budget will balance at approximately $53 per barrel this because of the Fiscal Rule and the weak ruble. It means that the government is under much less pressure to participate in any actions to try and boost the price unless it approaches the breakeven figure. For 2019 the breakeven figure is expected to be $50 per barrel, he said.

Weafer explained that major oil companies appear to be opposed to a new round of production cuts. “They moved quickly to restore production when the previous OPEC-Russia deal ended in the spring and several have announced plans to boost investment spending to add new production,” he said.

The Russian government is unlikely to put the same pressure on the oil companies to comply with a new production agreement because it is much more focused on raising extra taxation from the oil sector in order to help fund the so-called May Decrees investment programme,” Weafer said, referring to the objectives outlined in Putin’s main development program for his fourth term in office. This is the plan to spend up to $350 billion to help improve infrastructure, to fund digitalization of the economy, to help create better paid employment in new sectors of the economy and to improve such areas as healthcare and other social programs.

Weafer also noted that Russian oil executives and government officials have stated that cutting production too soon may support or raise the oil price but that will only help US producers to gain market share at the expense of Russia and OPEC. “Russia is in no mood to do the US producers any favours especially when the US Congress is targeting Russia’s energy sector with more sanctions,” he said.

follow on twitter @energyinsider

 

- Advertisement -

Subscribe to our newsletter

Co-founder / Director of Energy & Climate Policy and Security at NE Global Media

Latest

Don't miss

Global reaction to Trump tariffs only reinforces his use of this tired and risky strategy

True to form, U.S. President Donald Trump disrupted global...

The New Face of an Old Enemy: The renewed dangers of ISIS and al-Qaeda

A dangerous cocktail of indifference and complacency enabled al-Qaeda...

EU-Central Asia Civil Society Forum enhances regional cooperation, sustainable development

Almaty, the largest city and former capital of Kazakhstan,...

Donald Trump is inaugurated amidst promises of security, stability and prosperity

After storming a frigid Washington D.C. during his extended...

Global reaction to Trump tariffs only reinforces his use of this tired and risky strategy

True to form, U.S. President Donald Trump disrupted global markets with a three-day surge of tariff announcements, border security negotiations and ultimately a 30-day...

Donald Trump is inaugurated amidst promises of security, stability and prosperity

After storming a frigid Washington D.C. during his extended inauguration festivities on January 20, Donald J Trump, America’s 47th and 45th President, launched a...

The heat is on Trump’s fossil fuel push, climate change pushback

2024 has officially been confirmed as the warmest year on record, with global temperatures surpassing the 1.5°C threshold mentioned in the Paris Agreement, Alberto...

The Biden administration’s parting gift to Russia: Still more sanctions

Clearly working overtime to underscore the Biden administration’s desire to inflict maximum economic pain on Moscow and its coterie of Ukraine invasion supporters outside...

Undeclared “open season” on energy infrastructure in Europe

Russia is claiming it has shot down nine Ukrainian drones that tried to attack the TurkStream pipeline, which carries Russian gas to Europe through...

Righteous indignation over Maduro’s inauguration unlikely to change Venezuela’s dark reality

President Nicolas Maduro of Venezuela was sworn in on January 10 for his third six-year term. Promising that his third term would be one...

Stringent new energy sector sanctions on Russia announced

On January 10, the U.S. Government released a massive new listing of over 200 entities and individuals involved in Russia’s energy sector for Ukraine-related...

NATO and EU strengthen Baltic Sea infrastructure protection after Estlink2 undersea power cable damaged

The damage of an undersea power cable off the coast of Finland in the Baltic Sea is the latest in a series of suspected...