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Everyone has been waiting to hear Russia’s latest words on the meeting this Saturday between OPEC members and non-OPEC members, and it looks like Russia just chimed in—but this time, with actions rather than mere words.
Vladimir Putin okayed on Monday the startup of Lukoil’s new Filanovsky offshore oil field in the Caspian Sea. This makes Russia’s second oil field brought online in the last six days (the first being Pyakyakhinskoye), after weeks of stringing the markets along with verbiage that implied Russian would be on board with a production freeze, as well as puzzling contradictory verbiage that indicated it wouldn’t.
Russia’s newest field to be brought online is expected to produce 90,000 barrels per day in 2017, which would be on top of not just current production, which as of September was sitting at a hefty 11.11 million per day, but on top of 11.11 million per day, plus any new production from Pyakyakhinskoye, but less any production lost from planned production declines in West Siberia.
To be fair, Russia did clarify at some point, in amongst all the unreliable words thrown about by various players that continue to rock the markets day after day, that they would be on board with a freeze if OPEC could get their ducks in a row and agree amongst themselves who will be the losers and who will be the winners. And let’s face it, any freeze would have clear winners and losers in the form of market share. (And as Igor Sechin, head of Rosneft, pointed out earlier in October, who would willingly volunteer to be one of the losers?)
It looks like Russia chose that conditional word “if” wisely, because after Friday, it looks like neither Iraq nor Iran are on board, and with Libya and Nigeria likely getting an exemption due to hardship and the subsequent lost market share, there are few member countries left to do the cutting.
The fact that non-OPEC members, including Russia, met to discuss joining in something that does not yet exist did not seem to placate the markets. Oil is trading down Monday at $47.11 for WTI and $48.85 for Brent.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.