OPEC is learning the dangers of dealing with the Kremlin. President Vladimir Putin now has the group’s Middle East kingpin Saudi Arabia over a barrel and can name his own terms to continue their partnership. The oil cartel depends on extending its alliance with Russia to keep restricting supplies if it stands any chance of engineering a quick rebound in prices. The price of Brent crude has collapsed by almost 15% since April, briefly falling below $60/b last week. Depressed prices are good news for consumers, but bad for OPEC’s petrodollar economies led by Saudi Arabia, which wants the group and its allies to extend production cuts at least until the end of the year. “On the OPEC side a rollover is almost in the bag,” said Saudi oil minister Khalid Al-Falih trying to reassure the market ahead of bilateral meetings with his Russian counterpart. “The question is to calibrate with non-OPEC,” he added. This primarily means Russia. Russia’s economic strengths Moscow can drive a hard bargain if it wants. Its diverse economy and flexible currency can better absorb the blow of a tepid oil market and can handle prices as low as $40/b if required. A bigger concern for… continue reading
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Source: CTRM Center