Volatile crude oil prices reflect a volatile geopolitical climate as well as concerns about global trade tensions, Russia’s energy minister said Friday.
Russian Energy Minister Alexander Novak addressed the price of crude oil ahead of next week’s meetings in Helsinki between Russian President Vladimir Putin and U.S. President Donald Trump.
The U.S. president expressed concern about rising crude oil prices in recent weeks, calling on Saudi Arabia to open the spigot to address a looming supply deficit in the second half of the year.
Novak was quoted as saying Friday by Russian news agency Tass that a higher price for oil was negative for the global economy.
“Crude prices are volatile and respond to existing general signals,” he said. “The current prices reflect trade wars statements as well.”
Crude oil prices have waxed and waned in response to a long list of issues, from militancy in Libya, pending U.S. sanctions on Iran and declining confidence in response to simmering global trade tensions. The price for Brent crude oil has been erratic for the better part of a month, posting a 3.4 percent gain on June 22 and a 6 percent drop on Wednesday. The price is down 1.7 percent so far since June 13.
Brent, the global benchmark for the price of oil, turned lower after a late June meeting of ministers from the Organization of Petroleum Exporting Countries. Member states decided to ease compliance with a multilateral production control effort. Supported in part by chronic production challenges in Venezuela, compliance in May was close to 150 percent.
Moving compliance to 100 percent adds a theoretical 1 million barrels per day to the market in the second half of the year. That’s eased concerns about further market deficits triggered by Venezuela and the possible loss of Iranian oil from the market when U.S. sanctions snap back in November.
If the market needs another 1 million barrels per day, Novak said members of OPEC, plus non-members state contributors, will “take a required decision.” Spare capacity, what producers can add to the market in relatively short order, is at a premium, however.
Novak sits on a committee monitoring compliance for OPEC production arrangements. The minister said during the weekend before OPEC’s last meeting that Russia could add about 175,000 barrels of oil per day in the second half of the year.
Russia is the largest non-member state contributor to the OPEC effort and few countries have the spare capacity available to respond to potential supply-side shocks.
By Daniel J. Graeber