Russia's largest oil producer criticizes OPEC+ cut policy – Commerzbank
|The head of Russia's largest oil company says that the production cuts by OPEC+ in 2016 and 2020 have strengthened the US shale oil industry and enabled the US to become a leading oil exporter, Commerzbank’s commodity analyst Carsten Fritsch notes.
OPEC+ cut policy strengthens US shale oil industry
“According to the head of Russia's largest oil company, the production cuts by OPEC+ in 2016 and 2020 have strengthened the US shale oil industry and enabled the US to become a leading oil exporter. This could be seen as a criticism of OPEC+'s current strategy of stabilising the oil market by restricting oil supply, because other producers would then step into the breach and take market share from OPEC+.”
“Exactly ten years ago, an attempt was made to adopt a different strategy, with limited success. At the time, OPEC decided to flood the market with oil from the beginning of 2015 at the initiative of Saudi Arabia in order to squeeze US shale oil producers out of the market with lower prices. However, the costs for the OPEC countries in the form of lost revenue were so high that they reverted to a policy of limiting supply at the end of 2016 and formed OPEC+.”
“As US shale oil producers have since succeeded in significantly reducing their costs and increasing productivity, they are now able to produce profitably at lower oil prices compared to ten years ago. This is also why OPEC+ is now facing the problem that the head of the Russian oil company indirectly referred to.”
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