Analysts Say Nyet to Russia Influencing OPEC Policy

by Ship & Bunker News Team
Friday February 5, 2016

Russia may seem to be playing high stakes poker with the Organization of the Petroleum Exporting Countries (OPEC), but Saudi Arabia is holding all the cards and the player it really aims to beat is Iran, analysts said this week.

Ian Bremmer, president of Eurasia Group, dismissed the importance of Russia sending mixed signals about talking with OPEC to reduce production output, noting that the country "is focused on budget and tax measures and isn't ready to sign up with the Saudis... as [oil] prices stay lower for longer, we might see a move, but right now they're just talking the prices up, which is most definitely in their interest."

An unnamed director at Morgan Stanley agreed: "Russia can only coordinate with countries outside of Saudi Arabia, like Venezuela; any cooperation without Saudi Arabia won't lead to a production cut.

"Everything else is a sideshow."

New York-based attorney Edward Mermelstein said his clients are beginning to examine investment opportunities in the US rather than Russia due to fears that the former Soviet Union can't do much to influence oil prices: "It's definitely not up to them."

More significantly, Bremmer points out that although many OPEC member countries want oil prices to escalate, many of these countries "hate each other, and that creates complications."

Bremmer adds that the two biggest rival members are the Saudis and Iran, and that from the former's perspective, the latter's nuclear deal with the US and attendant lifting of international sanctions "could not have come at a worse time: they can barely sit in the same room, let alone agree on a production cutback.

"And the last thing the Saudis are prepared to do is cede market share to Iran."

Meanwhile, earlier this week analysts noted there are "plenty of signs" OPEC's high output strategy is achieving its desired effect of quashing US shale production.