Takeaway: Send Email Questions for Hedgeye TV Interview with Former OPEC President

OPEC July 1/2 Meeting Preview: Deal Rollover But Russia Still in Play as Putin/MBS Meet at G20 - IMG 1078

OPEC will meet next week on July 1 and 2 in Vienna as Russia is again sending mixed signals, despite the Saudi energy minister’s declaration that an extension of the cuts was “in the bag.”

Perhaps the real OPEC meeting is this week at the G20 where President Putin and Crown Prince MBS will meet to discuss the oil market management partnership. Russia Energy Minister Alexander Novak said yesterday that they want to see how events at the G20 go before committing on a rollover of the production cuts.

In our view, we think it is very likely that OPEC+ will extend the production cuts that expire on June 30. It was announced earlier this month that President Putin will visit Saudi Arabia in October, and we believe the trip would not have been announced unless Russia had agreed in principle on supporting an extension.

Hedgeye TV will be interviewing former OPEC President and Algerian Energy Minsiter Chakib Khelil on Tuesday to preview the upcoming OPEC meeting, Gulf geopolitical risk and oil markets.  Send your questions by replying to this email or directly to and we will try to get them in during the interview.

As we wrote in a client note last week, we believe there are two open questions for the OPEC meeting: 1) what will be the duration of the cut extension: and 2) will Russia comply.  

Both questions are interrelated. First, it looks like Russia has agreed to the rollover as a result of Saudi Energy Minister Khalid al-Falih’s trip to Russia two weeks ago when the Putin trip to Saudi Arabia in October was announced.  

Russian energy companies don’t like the production cuts and oppose the extension. But it is also a growing concern of Russian government officials who view surging US production past them as the world’s number one producer as a threat to market share.  

Putin is a wildcard because he likes the world stage that comes with partnering with Saudis on oil market management and surely the meeting with MBS at the G20 will receive great attention. But even Putin is beginning to get concerned about US production, impacts of cuts on the Russian economy, and in general the oil dominance race with the US.

On compliance, we believe there is a tacit agreement between the Saudis and Russians that Russia can have a flexible compliance, as we outlined in our oil meeting preview note. The Russian companies want to hike production so while we think Russia agrees in principle to a rollover in a sign of unity, we will have to watch closely Russian compliance in the months ahead.  

On the length of the cut extension, it’s hard to see it going more than 6-months due to Russia’s concerns about the extension.  While certainly a longer extension will be more bullish for prices, we doubt Russia will go along.  Moreover, a six-month extension will coincide with OPEC’s winter meeting in early December, when we will see this scenario again.