Russia – the world’s second largest oil exporter – has signalled its willingness to work with OPEC this week to prop up crude prices through another round of production cuts to be announced at a meeting in Algeria.
‘But for all its talk of the need to protect its national interest amid declining revenues, Russia is unlikely to contribute meaningful reductions beyond already expected declines in the country’s production that are resulting from underinvestment. Led by Saudi Arabia, the Organization of Petroleum Exporting Countries is expected to announce that it will slash output by some 1.5 million barrels a day, as it seeks to bolster prices in the face of the continued weakening of global demand. The OPEC move would come on top of previous production cuts aimed at taking 1.5 million barrels of oil a day off the market. But the cartel is eager to see non-OPEC producers reduce their output, and Russia has taken up that challenge. But even with an announcement of a sizable cut this week, few analysts believe OPEC will be able to reverse the decline in crude prices, which have plunged from a record $147 (U.S.) a barrel in July to close Friday at $46.28 a barrel in New York, after falling as low as $40 the previous week. Prices won’t rebound until non-OPEC producers, including Russia and Canada, cut production in response to slumping prices, and global crude consumption revives, said Arjun Murti, oil analyst at Goldman Sachs. “We think the sharp, and sudden collapse on global oil demand exceeds OPEC’s ability to, on its own, balance markets and necessitates sharply lower crude supply,” Mr. Murti said. He projected crude prices will sink to $30 a barrel early next year, a level that would force Western oil companies to begin cutting back production.