Splits have started to appear in the agreement between Russia and oil cartel OPEC over production curbs aimed at pushing up the price of crude.
Speaking ahead of Friday’s OPEC meeting in Saudi Arabia, Russia’s Energy Minister Alexander Novak said producers could ease output restrictions before the end of the year, signed in January 2017, is due to end in December.
The deal has seen prices recover from a low of $34 per barrel in 2014 to a current price of around $68 (20 April 2018).
“The agreement lasts until the end of the year. In June, we can discuss, among other issues, a question about reduction of some quotas during this time, if it is expedient from the market’s point of view,” Novak told Russian news agency TASS.
At the Jeddah meeting, OPEC agreed to "continue to think through further means of strengthening cooperation" on production limits. The governing committee also welcomed assurances on this front from Iraq, Kazakhstan, Libya and Venezuela, and expressed its satisfaction with Iraq and Kazakhstan’s expression of support for improving levels of conformity.
Industry sources told Reuters this week that Saudi Arabia would be happy to see crude rise to $80 or even $100 a barrel.
Shale – a thorn in OPEC’s side
That seems unlikely to happen, however, given the vast reserves of US oil shale that become viable to extract with prices above $50 a barrel.
The 2014 price crash came as a result of OPEC trying to take out shale oil producers by flooding the market with cheap oil.
It worked in the short term, with many US rig contractors going to the wall.
Then, towards the end of 2016, OPEC nations decided they had had enough of cheap oil and tried a different tactic – turning off the taps.
Saudi Arabia persuaded a group of 24 countries, including the 13 other OPEC members and Russia, to curb global output by 2% to 1.8 million barrels a day.
The supply cuts pushed prices back up above $60 – but that just allowed the US shale-oil drillers to get back in business, pegging the price in the $60s.