Opec and Moscow strong-arm oil price

Opec has joined forces with Russia to mop up much of the oil market glut by agreeing to curtail production.

Andrew Van Sickle
By
published
in Features

Opec is contemplating its "most ambitious venture in decades", says The Economist. The oil exporters' cartel joined forces with Russia to mop up much of the market glut by agreeing to curtail production. Oil inventories in developed countries are again nearing the five-year average. Opec, led by Saudi Arabia, and Moscow have now confirmed they want to continue their production cuts until the end of the year and envisage a formal alliance to prop up oil prices for the foreseeable future.

But this will be a tricky tightrope to walk. If pricesrise much above today's $60-$70 a barrel, "it will flush out" yet more production from low-cost shale drillers in the US and other big producers such as Brazil. Saudi Arabia has long been Opec's swing producer, regulating output to underpin prices, but a long-term deal would require other Opec states to turn the taps on and off. Yet history shows they have often cheated on their quotas to maximise revenue, and at present Opec members Nigeria, Iraq and Iran are "itching to pump more", notes Elisha Bala-Gbogbo on Bloomberg. Oil bulls shouldn't get too excited.

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Andrew Van Sickle
Andrew Van Sickle
Editor, MoneyWeek

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.

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