OPEC has been pressing Russia to contribute the lion’s share of a non-OPEC production cut of 500,000 barrels a day (b/d). If no cut materialises, OPEC has said it will not proceed with its own plans to cut 1.5 million b/d. Russia responded to the OPEC call by offering a 30,000-b/d cut. This has since been ramped up to 50,000 b/d, but is still well below the minimum required to stabilise prices. The issue is to be settled at a 10 December meeting of a special Russian oil commission, at which proposals for deeper cuts will be tabled.

If Russia continues pumping at full capacity there is a high probability of a price war. OPEC president Chakib Khelil on 27 November warned that the organisation was prepared to play tough. ‘If we don’t cut production by 1.5 million b/d in January, it is clear that prices will collapse quickly and we can add production as well to exert additional pressure,’ Khelil said.

Russian Finance Minister Alexei Kudrin said in mid-November that the economy would suffer if prices fell below $14.50 a barrel. Moscow’s unwillingness to cut is tacitly supported by both the EU and US, who believe lower prices benefit their economies. After a 28 November meeting with his Russian counterpart, US Energy Secretary Spencer Abraham said the countries agreed oil prices ‘must be just’ and dictated by market dynamics.

Erratic demand signals have contributed to price volatility, with US gasoline stocks climbing strongly in the week ending 23 November after an unexpectedly weak rise in the previous week, according to American Petroleum Institute data published on 27 November. Crude stocks fell sharply as winter fuel demand started to pick up. Benchmark Brent crude on 28 November was trading at $18.88 a barrel, a $0.24 a barrel rise over the previous week.