Oil down 3% on “no new OPEC cut”; Russians speak for Saudis

Investing.com -- The Russians aren’t helping the price of oil — to the delight possibly of the West and the utter frustration likely of other producers within the OPEC+ alliance, not to mention market bulls.

Crude prices tumbled some 3% Thursday after Russian Deputy Prime Minister Alexander Novak, who is also the nation’s de facto oil minister, said he expected no new steps from OPEC+ at its meeting on June 4.

Given that Saudi Energy Minister Abdulaziz bin Salman had hinted just 24 hours earlier of the possibility of another round of production cuts at the meeting, Novak’s remarks meant only one thing — that the alliance will keep output unchanged.

“There’s also another interpretation of this, and that is the Russians and Saudis aren’t on the same page as to what’s needed to keep oil supported at above $70 a barrel,” said John Kilduff, partner at New York energy hedge fund Again Capital. 

“The Russians are basically saying ‘we’ll produce what we’ll produce and sell at whatever price we get. If you guys want to cut and push the market up, that’s up to you. Just don’t count us in.'”

New York-traded West Texas Intermediate, or WTI, crude settled down $2.51, or 3.4%, at $71.83 per barrel.

WTI had hit a three-week high of $74.73 in the previous session, helped by the Saudi hint of new OPEC+ cuts and upbeat U.S. oil demand data.  

London-traded Brent crude, the global benchmark for oil, settled at $76.26 — down $2.10, or 2.7%, on the day. Brent hit a three-week peak of $78.66 in the previous session.

OPEC+, an alliance of 13 Saudi-led nations in the Organization of the Petroleum Exporting Countries and 10 other oil producers steered by Russia, has had limited success over the past two months in trying to push crude prices up with production cuts.

In April, OPEC+ announced a 1.7 million-barrel-per-day cut, on top of a prior undertaking to shed 2M barrels daily. 

After the April cut was announced, crude prices only went up for two weeks, before turning lower over four weeks, erasing some 15%. The earlier reduction fared worse, resulting in just a few days of gains before prices tumbled to 15-month lows in March.

Novak, potentially sensing that another cut won’t do much for the group, said on Thursday he was still waiting “for an assessment of the situation in the market".

"But I don't think that there will be any new steps, because just a month ago certain decisions were made regarding the voluntary reduction of oil production by some countries due to the fact that we saw the slow pace of global economic recovery," he was quoted as saying by the Izvestia newspaper in a report reproduced by Reuters.