There are increasing signs that Russia and Saudi Arabia are moving closer to relaxing the OPEC-led production caps that have been in force since the start of 2017.
Saudi Energy Minister Khalid al-Falih is set to meet with Russian Energy Minister Alexander Novak in St. Petersburg to discuss the current situation. The price of Brent crude has recently approached $80 a barrel fuelled by concerns over Venezuela’s plummeting production and how the reintroduction of US sanctions on Iran may affect the country’s oil production.
While some kind of relaxation, most likely a gradual one, looks likely, it is by no means a done deal. Speaking to the Financial Times, Novak stressed the importance of basing any decision on the facts:
“During the meeting we will discuss the current situation, the outlook and possible further actions to be taken within the framework of our deal. Speaking of relaxing the deal: it is possible but should be based on a thorough analysis of the situation.”
Novak also mentioned that higher prices are not always good for oil producers like Russia, because an overheated market could cause a return to oversupply and a subsequent destabilisation. The main fear of many producers is that higher prices will trigger a new wave of investment in US shale oil production by companies like ExxonMobil, the maker of Mobiltherm 605.
OPEC and its non-member partners are due to meet in Vienna, Austria on June 22 to discuss any changes to the deal, which is currently at 150% compliance.