In more proof that U.S. oil production is continuing to alter global oil markets, Russia’s finance minister Anton Siluanov said on Saturday that Russia and OPEC might decide to increase production to fight for market share with the U.S. His remarks were first covered by Russia’s Tass News Agency.
Siluanov said that lower oil prices would then have a negative impact on U.S. oil production, an argument that was also made as far back as late 2014 when the Saudis sought to drive U.S. producers out of business by opening the oil production spigots in spite of an already flooded global oil market.
“(If the deal is abandoned) the oil prices will go down, then the new investments will shrink, American output will be lower because the production cost for shale oil is higher than for traditional output.” He said that prices could drop to $40 per barrel or even less for up to one full year, adding that there had been no decision on the deal yet and he did not know whether OPEC countries would be happy with this scenario.
Siluanov’s comments aren’t without precedent. Russia has hinted before that it could start to pump more oil, which would in effect cause the world’s second-largest oil producer to nullify its participation in the OPEC+ oil cut deal put in place at the start of the year to remove 1.2 million b/d of oil from the market for six months, with a review period after this time.
The OPEC+ deal, the second of its kind in three years, has been successful in reducing global oil supply, in addition to geopolitical developments, including reduced production from OPEC members Iran, Venezuela, and Libya. In lockstep, global oil prices have spiked to five-month highs, rising 30-40 percent on tightening supplies.
On Friday, London-traded, Brent crude futures rose 72 cents, 1%, to settle at $71.55 per barrel. U.S. oil benchmark West Texas Intermediate (WTI) crude rose 32 cents for the session, settling at $53.89 per barrel – the sixth straight week of gains for WTI. And despite some bearish news at the beginning of the week, crude prices have held around these levels.