Russia should stick with output cuts even at the cost of losing market share in the medium term, and should avoid an oil price war against the United States, the head of Russia’s sovereign investment fund, RDIF has said according to Kommersant.
Kiril Dmitriev, who is one of the main Russian architects of a production pact with OPEC, said that since 2017, Russia and OPEC have cut oil production jointly for the first time in an effort to boost the price of crude. Following their supply pact, oil has traded between roughly $60 and $85 per barrel, from below $30 before the deal took effect.
“For US shale production to go down, you need oil prices at $40 per barrel and below. That is not healthy for the Russian economy,” Dmitriev said on Wednesday.
“We should not take competitive action to destroy U.S. shale production,” said Dmitriev, speaking at the World Economic Forum in Davos, Switzerland.
Three years ago in Davos, Dmitriev became the first Russian official to mention publicly the possibility of a supply pact with the Organization of the Petroleum Exporting Countries. At that time, oil prices had collapsed after OPEC kingpin Saudi Arabia raised output to hurt higher-cost U.S. producers.
The rise in prices thanks to output cuts has brought roughly an additional $110 billion in revenues to Russia, Dmitriev said.
However, higher oil prices have also helped the United States, which is not participating in output cuts. The country’s production has rocketed, overtaking that of Russia and Saudi Arabia and making it the world’s largest oil liquids producer.