Russia will join in the OPEC deal to limit oil production… at least according Putin.
With an economy heavily dependent on oil revenues, Russia has suffered greatly under low oil prices so it was naturally supportive of the agreement in Algiers between OPEC nations to limit output and boost prices. The next OPEC meeting on Nov. 30 that will deal with the distribution of cuts and whether or not producers outside the group will take part will be a chance to show how committed to the deal Russia actually is.
Russia would prefer to freeze its output at current levels rather than make reductions, according to Energy Minister Alexander Novak. Yet, Russia is pumping more oil than ever before bringing into question whether or not it can actually be trusted to cooperate with OPEC.
“Traders have welcomed the news from Russia that it is ready to join other members to adopt sensible strategy to curb the supply and stabilize the price,” Naeem Aslam, chief market analyst at ThinkMarkets U.K. Ltd., said. “Caution may be the best practice. If history tells us anything, it is that these major oil players also have the habit to not respect the agreed agreement.”
Russia and the OPEC, who together pump about half the world’s oil, could actually boost fuel prices and revive the energy industry if the output restrictions are put into effect. Yet, while Putin’s comments suggest such an agreement is possible, Russia not committed to pulling back.
An OPEC committee will work on the details of how to share the burden of cuts and present its proposals at the formal Nov. 30 meeting in Vienna. There ministers from some group members will meet with non-OPEC nations including Russia to discuss wider cooperation.
The odds of a successful deal remains, according to Goldman Sachs, since Libya and Nigeria are pumping 500,000 barrels a day more than expected and poor compliance from non-core OPEC producers is expected.