When word first got out yesterday that Russian energy officials and the heads of some of its largest state-owned energy companies were meeting to discuss collaborating with OPEC to coordinate production cuts and thereby drive oil prices up from their bargain-basement levels, markets reacted strongly and prices spiked, but in the aftermath of that flurry of activity, there’s been plenty of pushback on just how significant this spate of news was.
The vice president of the state-owned oil company Lukoil helped kick off this speculation when he said earlier this week that “if such a political decision is taken, Russia should jointly work with OPEC to cut supply to the market,” concluding that “it’s better to sell one barrel of oil at $50 than two barrels at $30.” Lukoil is Russia’s second largest oil company, and a spokesperson for its largest—Rosneft—downplayed the chances of production cuts, telling the FT that “nothing new has happened,” and adding, “Consultations with Opec happen all the time. All positions are well known; they have not changed in any way.”
Market analysts themselves have piled on the skepticism. As one Barclays commodities analyst wrote, “Talk of an OPEC cut is likely no more than an attempt to shift market sentiment. We remain skeptical about a change.” “I think chances are pretty slim that there could be a major output cut,” said another analyst from Société Générale.
Russian Energy Minister Alexander Novak told Bloomberg today that while Russia was open to the idea of joint cuts with OPEC, it would only happen if those cuts were made by everyone involved. “This should be a consensus. If there’s a consensus, it makes sense,” he said, adding that “there’s no set date” for a meeting to hash this all out.
Still, just by mooting the idea, Russia has seen oil prices kick upwards more than 5 percent. Even if an actual agreement doesn’t seem in the offing (and it doesn’t), this hasn’t been a total wash.