Oil, yes of Opec with maxi cuts. But Moscow could blow up the cartel

3 ‘of reading

The fate of oil is in the hands of Russia. In the face of the coronavirus emergency, OPEC countries easily agreed on the need for extra production cuts of 1.5 million barrels per day. But the further closing of the taps is conditional on Moscow’s participation and other allies. And the green light is far from obvious.

A few hours after the final meeting of the Vienna summit (and after OPEC had already made its decision official), the Russian finance minister, Anton Siluanov, continued to argue that the agreement had yet to be reached.

On many other occasions, including the summit held last December, Moscow has sighed its collaboration to OPEC policies to the last. But the Opec Plus coalition – born in 2016 and later transformed into a stable organization – has so far always kept up, proving effective in defending the revenues, if not the market shares, of the producers who are part of it.

If this time the non-OPEC countries were to reject the proposal for joint action, the alliance would probably have come to an end.

Russia’s refusal could also completely blow up the newly approved deal, removing any brake on the drop in crude oil prices. OPEC – which reduced the forecast on demand growth to just 480 thousand bg in 2020 – specifies in the final press release that a third of the extra production cuts (i.e. 500 thousand bg) will have to be made by countries outside the group.