“The higher the price of oil then raises the risk of more investment into, for example, U.S. shale and Canadian Sands projects, which, as was seen in 2014, risks a big increase in global supply,” Weafer said in a research note originally published in an article for The Moscow Times Thursday. He argued, therefore, that Russia’s sustained backing of the OPEC-led deal could “create a risk of another collapse” next year.
Russia’s Energy Minister Alexander Novak — a key architect of the output cut deal that was extended last May — said in October that Moscow would be in favor of extending the OPEC-led production deal into late 2018. However, Weafer said Novak’s comments had since lost relevance because they were made at a time when the oil price was drifting in the $50 to $55 range.
Brent crude traded at around $62.05 a barrel Friday afternoon, up 1.14 percent, while U.S. crude was around $56.01 a barrel, up 1.6 percent. The price of oil collapsed from near $120 a barrel in June 2014 due to weak demand, a strong dollar and booming U.S. shale production. OPEC’s reluctance to cut output was also seen as a key reason behind the fall. But, the oil cartel soon moved to curb production — along with other oil producing nations — in late 2016.