Russia will prevent the oil prices war with the United States

Russia should not unleash an oil price war against the United States but rather stick with output cuts even at the cost of losing market share in the medium term, one of the main Russian architects of a production pact with OPEC said. Since 2017, Russia and OPEC have cut oil production jointly for the first time in an effort to boost the price of crude. Following their supply pact, oil has traded between roughly $60 and $85 per barrel, from below $30 before the deal took effect.

“For U.S. shale production to go down, you need oil prices at $40 per barrel and below. That is not healthy for the Russian economy,” Kirill Dmitriev, head of the state-backed Russian Direct Investment Fund, said on Wednesday. “We should not take competitive action to destroy U.S. shale production,” said Dmitriev, speaking at the World Economic Forum in Davos, Switzerland.

However, higher oil prices have also helped the United States, which is not participating in output cuts. The country’s production has rocketed, overtaking that of Russia and Saudi Arabia and making it the world’s largest oil liquids producer. U.S. production is expected to reach new highs this year. Russian President Vladimir Putin will visit Saudi Arabia later in 2019 to strengthen cooperation further, Dmitriev said. Azerbaijan, one of the largest former Soviet oil producers and a participant in the production deal with OPEC, believes the pact should be extended to the end of this year, President Ilham Aliyev said this week.

Russia says oil price war with U.S. would be too costly, Reuters, Jan 23