The Organization of Petroleum Exporting Countries (OPEC) and its partners are supposed to meet on June 25 to decide whether or not the cartel will continue its current oil production quotas through the end of 2019. With oil prices in the low $50s for WTI and low $60s for Brent, extending the deal seems like it should be a slam dunk. But, we’re just two weeks away from the supposed meeting date and Russia still hasn’t even confirmed that it will attend. (Russia’s oil minister is claiming a scheduling conflict).
Saudi oil minister Khalid al-Falih assured anxious oil watchers that every participating country has already agreed to support continuing the production quotas—except for Russia. That’s a very big exception! Instead of calming markets, this only exposes the extent to which OPEC has ceded power to Russia. The risk is that even if OPEC reaches an easy consensus on oil production, it will be meaningless if Russia refuses to participate.
The Russian and Saudi oil ministers will likely meet on the sidelines of the G20 summit in Japan on June 28, and there are reports that Saudi Crown Prince Mohammed bin Salman will meet with Russian President Vladimir Putin as well. However, the G20 summit will not take place until after OPEC is supposed to meet.
The last time OPEC met, in December, the group was unable to reach a consensus until Russia agreed to participate. It is entirely possible that without support from Russia for a continuation of the current production quotas, Iran, Venezuela and other smaller or suffering OPEC producers will refuse to support the deal. These producers resented Russia’s attempt to move the date of their organization’s meeting, and they are generally dissatisfied with Russia’s newfound influence on an organization of which Russia is not even a member.
Most analysts seem to expect the status quo to continue for OPEC and its partners, but there is a growing possibility that the tension will only rise. Even if Russia does not appear at the OPEC meeting, Russia will loom large over the discussions.