Business | Oil & Gas
Closer Russian ties to boost Opec clout
Closer cooperation between Opec and Russia, which between them supply half the world's oil, could see a bigger political risk premium priced into oil and add more muscle to the producer group's output policy.
- Agencies
- Published: 00:02 October 1, 2008
Dubai: Closer cooperation between Opec and Russia, which between them supply half the world's oil, could see a bigger political risk premium priced into oil and add more muscle to the producer group's output policy.
Russia's desire for deeper cooperation with Opec comes as its relations with the West have deteriorated over issues such as the conflict in Georgia. Moscow has already forged closer ties with Opec price hawks and US foes Venez-uela and Iran.
The biggest potential effect on prices would come if Russia joined any move by the Organisation of the Petroleum Exporting Countries to cut supplies, an unlikely step with oil trading near $100 (Dh367) a barrel.
But in comments raising the prospect of Russia actively managing supplies, Energy Minister Sergei Shmatko said Moscow wanted to influence prices by publishing output forecasts and delaying the development of fields.
"It's certainly not the sort of thing consumers want to hear coming out of a major producer," said Julian Lee, analyst at the London-based Centre for Global Energy Studies. "It will raise concern about the future of Russian production."
Shmatko said Moscow's policy would not involve coordinated action with Opec states, and added the ministry would be ready to unveil its approach at Opec's meeting in Algeria on December 17.
Industrialised nations
Even so, some analysts said the world's number two exporter may consider cooperation on output if the global financial crisis and economic downturn cut oil demand significantly.
US oil has fallen to around $95 a barrel from an all-time high of $147.27 reached in July as demand in industrialised nations weakens.
"You could get some cooperation in that scenario from Russia and other producers to sustain oil prices at say $80 a barrel," said David Kirsch, consultant at Washington-based PFC Energy. "But that would be an extreme case and relatively minor cooperation would be the extent of it, unless Russia reshapes its oil policy."
With no spare oil production capacity and output seen flat for years to come, Russia would be able to do little to help any future Opec decision to increase oil supplies.
Russia and a handful of other non-Opec countries pledged to cut output when Opec slashed supplies in response to the economic aftermath of the September 11 2001 attacks, which pushed oil below $20 a barrel. Many at the time viewed the change in Russian oil supply to the market as minimal.
Russia has long attended Opec meetings as an observer, but sent a delegation headed by Deputy Prime Minister Igor Sechin to Opec's September meeting. It plans to send another senior team to the December conference.
Tighter ties between Russia and Opec could see the ebb and flow of the Russia-US relationship have a bigger impact on oil price movements, Kirsch said.
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