Moscow considers new agreement to reduce oil production possible

  •   30/03/2020 - 11h44
  •   DEHOUI Lionel

According to Kirill Dimitriev (Director of the Swiss Sovereign Wealth Fund Ruisseau d'Investissement), a new agreement in view of Opep+ is possible if others join the initiative. It should be recalled that Opep+ is the grouping of oil-producing countries (whether or not they are members of a cartel). Kirill Dimitriev, however, left doubt as to which country he was thinking of in his statement. Moreover, the States of America do not participate in this group. One only has to go back in time to March 19 to understand the position of the current White House tenant Donald Trump. He said that Washington might become involved in the price war unleashed by Saudi Arabia as well as Russia when the time comes. This fact greatly penalizes American shale gas industrialists who were already suffering from very high production costs. The Trump administration is planning a diplomatic manoeuvre in the case.

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Moscow considers new agreement to reduce oil production possible
Image copyright: ben klocek - Flickr

The failure of the first reduction agreement

The American manoeuvre is aimed at getting Saudi Arabia to close its taps by threatening Russia to reduce its production. Moreover, the previous price support agreement to reduce production ended in a remarkable failure early this month. It was ratified by several producing states and the Organization of the Petroleum Exploration Countries. Saudi Arabia had decided to increase its production after the dazzling failure.

The failure in question concerns the negotiations started mainly with Russia in relation to the continuation of the programme. It should be noted that the simultaneous effect of this failure and that of the decline in oil consumption worldwide (due to the Covid-19 pandemic), caused a rather precipitous movement. It is the precipitation with a spectacular fall in prices worldwide. Mr Kirill Dimitriev continues in his statement to Reuters.


The Director's comments

The Director indeed specifies that "joint actions between countries are necessary to restore the economy" at the level of the whole world. He continues in his logic and warns that "these joint actions are also possible within the framework of the Opep+ agreement". It should be recalled that Energy Minister Alexander Novak and the Director of the Russian Direct Investment Fund (RDIF) were the main Russian players in the negotiations of the famous Opep+ agreement.

The said agreement will expire on March 31, which is already looking stressful. Moscow will have to put pressure on itself to be the best on the financial market. Likewise, it will have to find the right formula for a new deal to seduce all the oil players. Mr Kirill Dimitriev stated that the group is "in contact with Saudi Arabia and a number of third countries".

Information: He goes further in the rest of his statement by stating that "on the basis of these contacts, we observe that if the number of Opep+ member countries increases and other countries join, there will be the possibility of a common agreement to balance the oil markets".