Russia moves closer to OPEC ahead of oil production cut
As the world’s second largest exporter of oil, Russia could have a big influence on world oil prices. Just days ahead of an extraordinary OPEC meeting in Algeria, President Dmitry Medvedev said that Russia might cut output.
A joint agreement between OPEC and Russia could lead to global oil production being slashed by up to two million barrels a day. Medvedev noted that Russia was ready to coordinate its oil and gas supply policies with other hydrocarbon exporters. Alexander Razuvaev, Head of Analysis at Sobinbank says such a move will help push prices higher, and could lead to Russia playing a major role in the oil producers cartel.
“OPEC together with Russia represent 45% of world oil production. We foresee 50-60$ per barrel in January next year. There is another possibility – Russia might join OPEC as soon as next year and could play a leading role in the organization.”
Oil prices have plummeted from a high of near $150 in July to around $45, severely straining Russia’s budget. Russian oil revenues reached $1 Billion a day at this summer as prices peaked, but Russian oil production has also commenced falling this year, according to Artem Konchin, Analyst at Unicredit Aton.
“There is aleady a natural fall in production in Russia about 10%. So if there is no measures taken production will decrease by almost 1 million barrels a day.”
OPEC cut production by 1.5 million barrels a day last month, but crude prices have continued to fall. If the market has already priced in a two million barrels per day cut, then OPEC’s measures might not live up to market expectations.