(Bloomberg Opinion) — Is it really over? So soon?
Russia’s unwillingness to go along with Saudi Arabia’s emergency supply cut fuels speculation the whole OPEC+ thing is done. I don’t agree. OPEC+ has always been largely a marketing and political tool. Formally ditching it now would merely make obvious the underlying truth: OPEC+ wouldn’t exist in the first place unless OPEC on its own had lost credibility. If we are left with an arrangement mixing co-dependency with disagreement and frustration … well, we’ve all observed marriages like that, haven’t we? (Not yours and mine, obviously.)
What’s more, Russia is right.
It’s now been more than three years since the first supposedly six-month OPEC+ supply cut began. Saudi Arabia, OPEC’s de facto leader, had previously tried flushing the oil market in hopes of squeezing out rival U.S. and Russian barrels. When that didn’t work, it co-opted Russia into a plan to trade market share for higher prices. The results have been — to put it kindly — ambiguous.
OPEC’s market share has slumped to its lowest level so far this century, and Saudi Arabia’s is back to levels last seen almost a decade ago. Russian production, meanwhile, has flattened rather than dropped. That is positive in one sense, as that country’s oil majors would otherwise probably be raising output by several hundred thousand barrels a day each year. However, U.S. producers, given succor by OPEC+ and the support lent to oil futures, have gamely jumped into the gap.
As of late Friday morning in New York, Brent crude oil was trading below $46 a barrel — close to where it was the day before the OPEC+ agreement was first struck in November 2016. In other words, the group has traded market share in return for … well, maybe not nothing, but not a whole lot of something…
Source: FuelFix
