Russia Happiest with Crude Prices in the Mid-$50/bbl Range: Analyst

by Ship & Bunker News Team
Monday November 20, 2017

As analysts and crystal ball gazers alike ponder where the price of crude may be heading amid talk of consensus over an oil deal extension and concerns of rising geopolitical risks, Chris Weafer, senior partner at Macro-Advisory Ltd, believes the plan as far as Russia is concerned is to keep crude priced in the mid-$50/bbl range.

With Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers set to meet on November 30, Weafer told CNBC Monday he believes Russia will delay making a decision on any extension until closer to the end of the current deal, which is due to expire in March 2018.

At this point they will be able to better assess the market situation, he says, especially with respect to US shale.

"They're afraid of creating conditions that could again see the oil price ramp up, bring on this extra supply, and then lead to another collapse. They're happier with the price in the mid-50's where it's stable and more predictable," said Weafer.

Russia is ultimately heading towards a strategy of balancing the budget at about $40/bbl in 2022, he added.

Reuters, meanwhile, reports Russian Energy Minister Alexander Novak as saying his country would determine its position on the output deal after discussing a possible extension with Russian oil producers on Tuesday.

As for the rest of the oil deal participants, Iranian oil minister Bijan Namdar Zanganeh Monday was the latest voice to suggest a consensus on extending the deal was close. He told the country's official news network for oil and gas, SHANA, that most OPEC members now support the plan.

But the comments failed to offer any support for oil prices, something that came of little surprise to Ole Hanson, head of commodity strategy at Saxo Bank.

"I basically think that OPEC has been boiling the chicken on production cut extension news for so long that the soup cannot get any stronger," he told UPI.

WTI ended the day down $0.46 to $56.09, while Brent slipped $0.50 to $62.22.