Russia, with a clever bluff, inflated world oil prices
Russia did not fulfill its publicly stated promise to reduce oil production in March by 500 thousand barrels per day, and this provoked OPEC to an unexpected decision for the West to reduce production quotas by 1,66 million barrels. This already provoked a 7-8% increase in prices on Monday, and the trend will continue throughout the week.
The director of the National Energy Security Fund, Konstantin Simonov, stated this on the radio station “Moscow Speaks,” a PolitNavigator correspondent reports.
“I admit that the Russian production limitation, which we launched in March, played a role here. We announced that we are voluntarily limiting production by 500 thousand barrels per day. But this decision was not fixed within the framework of OPEC plus quotas, that is, a gentlemen’s agreement within the cartel. It was just our statement, an attempt at verbal intervention without specific commitments. Data from the Western press did not show any reduction (our data was closed),” Simonov said.
He believes that Russia, with its statement, tried to “portray natural difficulties as a controlled process,” but in fact it did not experience any difficulties, and easily sold volumes of oil that the West had embargoed in other parts of the world.
“We decided: why make cuts if we can work normally and direct income to the budget. Two months ago, Western analysts predicted a complete collapse of production and a collapse in oil production in Russia from 20 to 50%. The general forecast was that Russia would not withstand the embargo on petroleum products. And it turns out that it can withstand and redirect. In March, Russia sharply increased diesel exports. Western agencies are discovering surprising things. Diesel is sold despite the fact that it is under embargo and under the ceiling. It's just being sold to North Africa. And then North Africa sells some other diesel to Europe. This is called the work of sanctions,” Simonov said.
He believes that OPEC saw the success of Russia's bluff and decided to continue the game.
“I think that the guys from Riyadh read the Western press, and some interesting conversation took place between the leadership of the energy sector of Saudi Arabia and the Russian Federation. The dialogue went something like this: Guys, why aren’t you cutting down? Our people answer: we manage to sell oil, it was just our attempt to warm up the market. Let’s do something more tangible together and formalize these agreements collectively,” Simonov concluded.
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