International oil markets could be heading towards a new war, as leading OPEC and non-OPEC producers are vying for increased stakes. The unexpected cooperation between OPEC and non-OPEC countries, instigated by the full support of Saudi Arabia (OPEC) and Russia (non-OPEC) has brought some stabilization to the crude markets for almost half a year. The expected crude oil price crisis has been averted, it seems, leaving enough room when looking at the fundamentals to a bull market in the coming months. As long as Saudi Arabia, Russia and some other major producers (UAE, Kuwait), are supporting a production cut extension, financials will be seeing some light at the end of the tunnel.
The effects of the 2nd shale oil revolution, as some have stated, have been mostly mitigated by a reasonably high compliance of OPEC and non-OPEC members to the agreed upon cuts, while geopolitical and security issues have prevented Libya, Iraq, Venezuela and Nigeria, from entering with new volumes. Stabilization in the crude oil market, as always, is not only fundamentals but also geopolitics and national interests. The latter now could also be the main threat to a successful extension of the OPEC production cuts in the coming months.
Fears are growing that OPEC’s leading producer, Saudi Arabia, is no longer happy with the overall effects it is generating by taking the brunt of the production cuts, while at the same time, other OPEC members, such as Iran and Iraq, are looking at production increases. Saudi Arabia’s other main rival Russia is also not sitting idle. Even if Moscow is still fully behind the official production cuts, Russian oil companies have been aggressively fighting for additional market share in Saudi Arabia’s main client markets, China, India and even Japan. Iraq and Iran, in contrast to what was expected, have been cutting away share in Europe.