The Global News Source for the World of Science
28 June 2018Lab Chat
Crown Prince of the United Arab Emirates Shaikh Mohammed bin Zayed and Russian President Vladimir Putin met at the beginning of the month to sign a landmark declaration. Among other things, the strategic partnership signals the countries’ intentions to continue working together on oil and gas policy.
The announcement confirms that alongside Russia, OPEC countries will continue to dictate oil and gas prices for the foreseeable future. Despite the proliferation of shale gas in the United States, the two entities retain enough of a stranglehold on the industry to ensure they receive favourable terms with regards to the supply and demand of this most precious of commodities.
Over recent months, Russia has been increasingly turning its back on Europe with regards to its oil policy. It has slashed Europe-bound exports from its ports by 19% and increased Chinese exports by 43%. The latest agreement with the UAE signals a further move away from Europe and towards enhanced cooperation with the Middle East.
As well as strengthening the stability of the global oil market, the union is expected to affect other bilateral parts of national and regional policy. For example, the declaration states that the two countries will seek collaboration on key issues such as disarmament, law enforcement and piracy.
Shaikh bin Zayed was optimistic about the future of ongoing relations between the two nations in the wake of his meeting with Putin. “I think that our cooperation will expand, thanks in part to the signing of the declaration,” he told news reporters.
The declaration is symbolic of the increased collaboration between Russia, OPEC and several non-OPEC countries over recent years. After first entering into negotiations with OPEC nations back in 2016, thus creating a so-called ROPEC alliance, Russia has been predicted by some commentators to have a controlling influence on 73% of global oil supplies in the near future.
Indeed, industry expert David Blackman predicts the agreement will shape the market climate for years to come. “While we can expect this new price volatility to continue for the foreseeable future, unless and until OPEC/Russia react by putting more exports onto the market, the overall inertia behind crude prices continues to mitigate in favour of higher prices to come,” he wrote in Forbes.
Even the merest suggestion of activity from ROPEC countries appears to have an immediate effect on the sector. Last month, Russian Energy Minister Alexander Novak hinted at an end to production cuts, which resulted in a drop in prices straight away. Having enjoyed a high of $72.83 per barrel on WTI, prices fell to $68 per barrel in the wake of Novak’s comment. Such power makes the Russians a valuable ally to have and the recently signed declaration only cements that friendship between the two countries.Download PDF