Oil and OPEC in 2020: Will Russia break the rules of the game?

According to Russian Energy Minister Alexander Novak, it is not unlikely that Russia will withdraw from the OPEC deal in 2020, according to a Russian report.

In fact, this deal no longer had an economic impact already, with the stability of the situation in the oil market, and black gold prices became satisfactory to consumers and producers alike, which was confirmed by the Russian minister.

In his report published by the Russian newspaper "Svabadonaia Brasa", Anton Chaplin said that the OPEC agreement has been in effect since December 2017, as it was concluded with the aim of maintaining high oil prices and reducing the value of production by 1.2 million barrels per day.

In July 2018, WTO members in Vienna agreed to sign an ongoing cooperation agreement and extend the agreement for a period of nine months, but Russia itself has not fulfilled its obligations under the agreement. For example, in December, it pumped 11.3 million barrels per day, an increase of 62,000 barrels over the limit set by the deal.

The writer added that Russia provided a variety of reasons to explain its non-compliance with the obligations of the deal, from the harsh climate to the technical problems caused by pollution of the Druzhba pipeline.

But these excuses did not prevent Russia from agreeing with its OPEC partners to further tighten oil production restrictions in the first quarter of 2020. In this spirit, the participants in the agreement intend to meet to discuss the specific criteria for the new deal next March at OPEC headquarters in Vienna, however, the prospects for the meeting remain murky.

For his part, the Russian Energy Minister stated that withdrawal from the OPEC agreement guarantees the preservation of Russia's share in the oil market, as well as the implementation of promising projects by Russian oil companies.

Different situation
The writer quoted the chief researcher at the Gedar Institute for Economic Policy, Sergey Chavoronkov, that in the 1970s OPEC controlled more than 60% of oil production on the planet, but now the situation has changed radically, and its share no longer exceeds 32%. In contrast, Russia's share of world oil production is 11.3%, while the United States is unique with 17.3% of all world oil production.

In contrast, the largest producers, led by Rosneft, oppose the OPEC deal, which was explained by the CEO of the company, Igor Sechin, who publicly opposed the extension of the deal.

Supporters of the deal, led by Russian Finance Minister Anton Silwanov, say the oil market is inflexible, and an increase in production could lead to a far deeper fall in prices.

Researcher Chavoronkov added that it is likely that oil prices will depend on the amount of cash in the world. For this reason, in 2008 oil consumption decreased by 2%, while prices decreased by 2.5%.

According to Chavoronkov, the decision to exit the deal does not conceal hidden goals, such as affecting the countries of the Middle East, especially since Russia does not have substantial contradictions with OPEC countries. For example, the Gulf states do not support the military operation in Syria, but they have not opposed it, unlike Turkey and the United States. On the other hand, a number of Gulf countries are investing in the Russian Direct Investment Fund.

Chavoronkov explains that the Arab countries lack the opportunities to retaliate against Russia for taking this decision, especially in light of the internal contradictions in the Arab Gulf, and the stalling of relations.

It should be noted that Qatar itself had left the organization this year, and Ecuador may withdraw from the agreement at the beginning of next year.

The writer noted that from the economic point of view, Libya is no longer of great importance, especially in light of the low amount of oil produced, which has not exceeded 1.3 million barrels per day. Nor does Moscow seek to control it, especially after Turkey intends to intervene militarily there.