HMM: Will Russia Abandon The OPEC+ Oil Deal?

OPEC’s task in estimating global oil supply going forward has been made more difficult by mounting uncertainty over Russian oil supplies to Europe via the Druzhba pipeline, expectations of further production declines in Venezuela, and the possibility of an outage in Libya, which is in the midst of a civil war with rival armies fighting for the capital Tripoli.

Amidst all this, Russia sent several ambiguous messages to the market last month. First, its Finance Minister Anton Siluanov said that OPEC and Russia might choose to fight for market share against the U.S., even if this means quitting the OPEC+ deal and sending oil prices significantly lower.

Then at the end of last month, Putin said that he hoped the Saudis wouldn’t break their promises under the OPEC+ deal, adding that he hadn’t heard of anyone indicating willingness to quit the agreement.

As for Russia itself, it has been struggling to reduce its oil production to the agreed upon level under the pact.

Moreover, Russian oil companies have been balking at the output cuts because the OPEC+ deal has been meddling with their production growth plans.

The amazing thing about OPEC’s years-long effort to cut production and inflate prices is how well it’s worked. Success at raising prices usually induces cheating which causes prices to fall again. That hasn’t happened (yet) this time around, which I’ve taken as an indicator at just how desperate OPEC/Russia have become in the face of ever-increasing American fracking.

But maybe new cracks are finally starting to form.