Russia’s Wealth Fund: Oil Price War With U.S. Would Hurt Russian Economy

 because Moscow would also be hurt in such an event, according to Kirill Dmitriev, chief executive at the Russian Direct Investment Fund (RDIF) and the first Russian official to publicly hint three years ago that there might be an alliance with OPEC to lift oil prices.

“For U.S. shale production to go down, you need oil prices at $40 per barrel and below. That is not healthy for the Russian economy,” Reuters quoted Dmitriev as saying at the World Economic Forum in Davos.

“We should not take competitive action to destroy U.S. shale production,” the head of the Russian wealth fund said.

Although Russia doesn’t need as high an oil price as does Saudi Arabia to balance its budget, a stable price at around $60 is preferable for Moscow.

At the end of last year, Russian President Vladimir Putin said that Russia is comfortable with $60 oil, as its budget is balanced at $40 oil price, and for 2019, that budget-balance oil price is calculated at $43 a barrel.

Dmitriev said in Davos on Wednesday that Russia should not try to undermine U.S. shale and should stick instead to the OPEC/non-OPEC production cuts, even if those cuts mean losing market share in the medium term.

Russia leads the non-OPEC group of producers who are part of the production cut deal which is removing a total of 1.2 million bpd from the market until June 2019, to rebalance the oil market and lift oil prices.

Thanks to the output cut deal with OPEC in place since January 2017, Russia’s revenues have increased by around US$110 billion because of the higher oil prices that resulted from the cuts, Dmitriev said, as carried by Reuters.

The United States has also benefited from those higher oil prices with shale drilling resurging last year and U.S. oil production setting records. The shale boom has made the U.S. the world’s top oil producer ahead of Russia and Saudi Arabia. Russia’s oil production hit a post-Soviet high of 11.421 million bpd in October last year. Under the OPEC+ deal, Russia will be cutting 230,000 bpd from October levels to 11.191 million bpd, and reduction would be gradual, as it was in the previous round of cuts.