Oil rises after Russian Federation leans toward cut

Цена на нефть обновила минимум с октября 2017 года

The tool, known as OpecWatch, uses West Texas Intermediate crude oil options markets to calculate the probabilities of certain outcomes of OPEC meetings.

The kingdom probably needs to keep several hundred billion dollars' worth of reserve assets on hand to maintain confidence in its fixed exchange-rate peg to the US dollar and prevent a run on the currency.

Then came out a report by Reuters that Russian Federation has started to concede that it needs to join a new Saudi-led oil production cut, but is still bargaining with its key OPEC partner over how much, how fast, and for how long it would potentially reduce its oil output.

"His visit is a short one but we spent time and visited the vice president, we discussed issues on oil output, what we are doing and how to prepare for OPEC meeting".

"In the short-term, the market would probably like to see a cut, though it would be hard to argue that one is really priced in". The kingdom had raised production to an all-time high in November, pumping 11.1 million to 11.3 million bpd.

Three countries now account for close to 40 percent of global crude oil production and only one of these countries is a member of the Organization of Petroleum Exporting Countries.

"If OPEC cuts output to support prices like they did beginning in 2017, they will indirectly be providing the financing for new production to [U.S.] oil producers", says Richey.

"Perhaps the recent increase in OPEC production is actually the strongest signal that it intends to announce a cut, as members jockey for position ahead of the debate about who should bear the cuts - this has happened before". Before that June increase, oil producers had been cutting back production for more than a year to get rid of an oversupply.

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Saudi Arabia shouldered a disproportionate share of the cuts in 2017/18, just as it had done during earlier cuts in 2008/09 and 2003/04.

Against this backdrop, Saudi Arabia has talked of the need for a cut, but Russian Federation would rather delay to see the effects of Iranian sanctions and "underwhelming growth" in United States production. True, this growth will likely be nowhere near the more than a million bpd that USA producers have added in the past year, but it could be substantial in the case of Iraq, if the political and price conditions allow it.

Saudi Arabia can not afford another slump in oil prices.

Now the kingdom is trying to assemble some diplomatic cover for cutbacks it will nearly certainly have to make anyway.

"We are going to.do whatever is necessary, but only if we act together as a group of 25", Falih told reporters, referring to the Organization of the Petroleum Exporting Countries and its allies.

"As Saudi Arabia we can not do it alone, we will not do it alone", he told reporters in Abuja where he met his Nigerian counterpart Emmanuel Ibe Kachikwu. "I think people know that leaving the market to its own devices with no clarity and no collective decision to balance the market is not helping".

Saudi Arabia's fundamental problem is structural rather than diplomatic: every time the kingdom tries to raise prices by restricting its output, it only encourages more increases in US shale production.

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