Russian Deputy Prime Minister Novak stated on Thursday that it's unlikely that OPEC+ will take new measures at its first face-to-face meeting in six months on June 4, following a decision to cut production in April. This is due to some countries making voluntary cuts a month ago, in response to the slow pace of global economic recovery.
Novak emphasized the current task is to monitor the market situation and respond in a timely manner. He reiterated that the aim of OPEC+ is not to drive up oil prices, but to balance them to ensure the interests of producers and consumers.
Novak expects Brent crude oil prices to be slightly above $80 per barrel by the end of 2023. He hopes for an increase in oil demand in the summer. He believes the current price of $75-76 reflects the market's assessment of the global macroeconomic situation. The U.S. interest rate increase has hindered further oil price hikes.
Hours after making the above statements, Novak appeared to leave room for maneuvering, stating that OPEC+ will reach a consensus on action steps when necessary and, if necessary, can decide whether to adjust its oil production policy at the June meeting.
On Wednesday, Russian President Putin said energy prices are approaching "economically reasonable" levels. This sends a similar signal to Novak's, indicating that OPEC+ might not need to take any action at its next meeting.
On Thursday, after rebounding in the previous few days, WTI crude oil futures fell more than 4.5% at one point, dropping below $71 before narrowing the decline.
The latest stance from Russia contradicts messages conveyed by Saudi Arabia this week: Saudi Arabia is prepared to take action, while Russia advocates staying put.
On Tuesday, Saudi Arabia warned oil short-sellers to "be careful" and said they would continue to feel pain. With only about a week left before the June OPEC+ meeting, Saudi Arabia's warning ignited expectations that OPEC+ would cut production to stabilize oil prices.
Market participants pointed out at the time that traders are betting an economic recession could damage oil demand, and there are a large number of speculative short positions in the market. This is why OPEC may want to take proactive measures to cut production. OPEC+ already unexpectedly reduced in early April and, if necessary, they may intervene again in June.
Russia needs oil revenue to fund the Russo-Ukrainian issue. Agreeing to further cuts at this point may be beyond what Russia can bear.
Saudi Arabia and other Gulf oil-exporting countries might agree to take action without Russia's support, but given that they've already shouldered most of the burden of production cuts this year to support the market, these nations may be reluctant to do more.
Given the conflicting signals from Saudi Arabia and Russia, finance blog Zerohedge recently commented that OPEC's credibility appears to be seriously damaged.
Media analysis suggests that the contradictory signals sent by the two giants of OPEC+, Saudi Arabia and Russia, on oil policy indicate that the organization may not reach consensus on new production cuts next week. They will do nothing to improve the gloomy sentiment in the crude oil market. Furthermore, OPEC's own estimates say that there will be a severe supply shortage in the second half of this year. Any further reduction in actual production will further exacerbate tensions between consumers and producers.