Russia shouldn’t try to bring U.S. shale production down with an oil price war.
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
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
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
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