Russia disagrees with OPEC on production cut

RUSSIA / FSU POLITICS - In Brief 08 Mar 2020 by Alex Teddy
On March 6 Russia and OPEC agreed to disagree on pumping less oil. OPEC will produce 1.5 bpd less than before. The OPEC cuts take effect on April 1 and will run to the end of 2020 unless some change is agreed.Russia is not in OPEC but is in OPEC +. Coronavirus has driven down demand. This has hit Russia's economy badly. Russia desperately needs oil revenue. Moscow fears that reducing production will do little to raise prices. The US shale oil boom will simply provide an alternative source of energy. Russia and Saudi Arabia have had a very cordial relationship for the past 3 years. This is now in doubt. The context is that Russian oil majors have been against OPEC+ for years, in particular Igor Sechin and state-owned Rosneft. They are happy with Novak refusing to budge in Vienna.The Saudis are reportedly wanting to launch a price war - but for Russia the question is whether it will see them 'blink'. On past experience such as 2014/15, we would have to say no and that they are unlikely to return to the negotiating table. Though this also depends on the US response in support of US shale.

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