Crude Economics
Russia Really Doesn’t Want to Cut Oil Output

OPEC Secretary General Mohammad Senusi Barkindo would like nothing more than Russia’s cooperation in the cartel’s proposed production cuts, set to be discussed in Istanbul this weekend ahead of OPEC’s semi-annual meeting this November. He plans to meet with Russian Energy Minister Alexander Novak to see if the Kremlin might join its fellow petrostates in cutting away at the oversupply that has dogged global crude prices over the past 28 months. The WSJ reports:

Non-OPEC producer Russia has rarely joined efforts to bolster oil prices and most recently said controlling output would be difficult because a large part of its production is outside state hands.

Russian oil production has been at or near post-Soviet records in recent months, and the government relies heavily on oil revenue. But Russian President Vladimir Putin has said his country should consider joining limits on production with OPEC.

But Novak has in the past poured cold water on the idea of Russia constraining its output in coordination with OPEC. After Venezuela’s oil minister openly called for Moscow’s cooperation last week, Novak responded by saying ““Russia will carefully consider those proposals which will be eventually drawn up…But our position is keeping the volume of production at the level that has been reached.”

Novak followed that up with another rejection of the idea of production cuts on Friday afternoon. The WSJ reports:

Oil prices eased on Friday after Russian energy minister Alexander Novak said he wasn’t committed to reaching an agreement on production cuts in a meeting with key members of the Organization of the Petroleum Exporting Countries in Istanbul next week.

…Mr. Novak’s comments were enough to reverse the recent oil price rally, which had almost threatened to push Brent through the $53-a-barrel barrier.

Remember, the only thing petrostates care more about than the price of oil is their share of the global market. Don’t hold your breath waiting on the Kremlin to hold hands with Saudi Arabia, Iran, Iraq, & co. and sing kumbaya.

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