The world's second-largest oil exporter could be poised to back out of a widely anticipated extension to global supply cuts, Chris Weafer, senior partner at Macro-Advisory, said Friday.
OPEC members are reportedly forming a consensus with other allied crude exporters to extend their production deal by nine months. That would prolong the agreement among OPEC, Russia and other oil-producing nations to keep 1.8 million barrels a day off the market through the whole of next year.
Nonetheless, Weafer said that while at first glance Russia backing out of a production deal looking to clear a global supply overhang seemed to be a "crazy position to take," the context of Russia's changing industrial priorities meant it actually made "perfect sense."
Weafer said if oil stays in the $60 to $65 a barrel range, Moscow's support for a deal extension beyond March next year would be "very unlikely." Weafer said that Russia still makes money with the oil price in the mid-$50s and any higher would prompt U.S. shale firms to ramp up production. He also believes that this price would incentivize the Russian economy to diversify away from oil, a major long-term benefit for the country.