OPEC Plus Adds Uncertainty to Oil Market
Russia’s importance to a deal to extend oil export cuts means that it holds the cards for OPEC and the deal will be less certain
Before the formalities begin this week in Vienna, the only question oil ministers will have left is who pays for the Sacher torte.
That is unusual for normally fractious meetings of the Organization of the Petroleum Exporting Countries. Even less usual is that, of the two crucial parties at the table, the pivotal one isn’t even a member—it is Russia. Saudi Arabia, the world’s top crude exporter and traditional OPEC kingpin, is facing political upheaval at home as 32 year-old Crown Prince Mohammed bin Salman purges political rivals. An export revenue slump is the last thing he needs.
For those concerned with the price of oil rather than geopolitics, Prince Mohammed and Russia’s Vladimir Putin being strange bedfellows isn’t what matters. The consensus seems to be that they are headed toward a deal that will see “OPEC-plus”—a collection of countries that control over half the trade in crude—extend cuts from the first quarter of 2018 through the end of that year.
But the devil may be in the details. Russia, in particular, is a tricky partner because it doesn’t have a single large, state-owned oil company to corral. Furthermore, Mr. Putin is on firmer ground at home and in a strong negotiating position. Any agreement may contain wiggle room that hinges on aspects such as compliance or prices that could increase how much crude actually comes onto the market next year.
With Brent crude up 22% in the past three months, investors may not want to push their luck betting on continued strength once a “successful” meeting of exporters concludes in Vienna