Russia and the OPEC may drop oil deal due to U.S. production rise

Russia OPEC

Russia and the OPEC may decide to boost production to fight for market share with the United States but this would push oil prices as low as $40 per barrel, TASS news agency сited Russia’s Finance Minister Anton Siluanov as saying.

“Russia and the OPEC consider dropping oil pact and fight with U.S. for market share”

Siluanov said in Washington that oil prices could drop to $40 per barrel or even less for up to one year if the deal is abandoned.

Russia faces a dilemma

“There is a dilemma. What should we do with OPEC: should we lose the market, which is being occupied by the Americans, or quit the deal?” Anton Siluanov, speaking in Washington, said, TASS reported.

“Crude prices go up and the OPEC is facing issues”

According to the Russian minister, if the deal is abandoned, the oil prices will go down, then the new investments will shrink. “American output will be lower, because the production cost for shale oil is higher than for traditional output.”

Similarly, Russian energy minister Alexander Novak said on April 9 that he saw no need to extend the agreement between the OPEC and its allies if the market is expected to stabilize by the second semester.

OPEC in crisis

U.S. crude prices are rapidly rising. The severe crisis in Venezuela, U.S. sanctions on Iran, and now a wave of violence in Libya are undermining OPEC production, which is progressively running into trouble.

Hence, the situations presented in these three nations have contributed to increase U.S. crude prices to over $64 per barrel.

The most recent OPEC crisis broadens the supply restrictions imposed by leader Saudi Arabia, which has lowered production and exports to the United States in an attempt to generate higher prices and balance its budget.

In spite of U.S. record production, prices have skyrocketed by 50 percent since dropping to $42.53 per barrel on Christmas Eve.

Similarly, gasoline prices are rising as the U.S. economy faces a slowdown.

For more information, check Energía16

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