It’s getting more and more obvious that crude oil is not going to grow as expected, which is why the hopes laid by the Kremlin on higher oil prices and higher income from oil exports are probably not going to become a reality. Most likely, this is not going to happen over the next couple of years as well. Despite extending the Vienna Accord during the recent OPEC summit, the participants of the summit still cannot see the expected results as oil prices still haven’t shown any considerable rally, thereby indicating no significant progress.
For of all, experts say that the key reason for that is Donald Trump’s active oil policy. For those of you who don’t know, during his election campaign he promised to cancel the existing oil production and export bans. Well, this is actually what he did shortly after moving to the White House as the 45th President of the United States. He has been encouraging the U.S. shale oil production and oil exports to China. Not so long ago, China and the USA agreed on American oil exports to China. This is a long-term contract, experts say. This means that even though the OPEC and their non-OPEC peers led by Russia did agree to extend the production cuts over the next 9 months in order to reduce the oversupply, the USA and other oil producers not participating in the Vienna Accord are likely to take at the chance and make up for those production cuts. Well, this is actually something they have already been doing for a while.
At the same time, experts doubt that the OPEC and their fellows have actually been doing their best to stick to the agreement. All of that leads us to believe that we are likely to see the agreement fail once again at the end of the day. If so, this means no higher prices for Russia and the OPEC. Since Russia and other oil producers are heavily dependent on the export of crude oil, reduced income means more economic and financial challenges for Russia further down the road. Some experts believe that, oil prices are still going to move back into the $40-50/b range for the rest of the year, with shale oil being the key reason for that.
