Will Russia support OPEC extension? - Natixis

The aims of the state, driven primarily by geopolitics, are not aligned with aims of the Russian oil companies, who i) want to ramp up production at new greenfield projects and ii) fear increasing US production with Brent above $60/bbl, according to analysts at Natixis.  

Key Quotes

“The Saudi Arabia – Russia axis has been the backbone of OPEC’s deal, and any Russian hesitation would be a major blow.” 

“With net long positions increasing to record levels over the last few weeks, a sell off is likely if OPEC’s meeting on November 30th disappoints.  We see Russian hesitation is the main risk, with other OPEC members largely falling in line behind Saudi Arabia.”  

“The geopolitical benefit for the Russian state will be too much to resist in our view, and Russia will agree to extend cuts.”  

“Further production cuts into next year may result in Greenfield project delays for Russia’s domestic oil companies and give a boost to US independent shale producers as prices rise. However, Russia’s growing influence in the Middle East and the burgeoning Russian-Saudi Arabian relationship are too big a prize to risk for Moscow, despite opposition from the domestic oil industry. We think that cuts will be extended to the end of 2018, with full Russian support.”