The dramatic drop in crude oil prices is in large part because of "aggressive" output in the United States, but OPEC still factors in, a Russian minister said.
Crude oil prices declined 5 percent Wednesday after a federal U.S. report revealed dramatic gains in crude oil storage and production levels. The U.S. shale oil boom that evolved over the last decade put negative pressure on crude oil prices, leading to an ultimate plunge below $30 per barrel last year. That compared with a period three years ago where oil above $100 per barrel was relatively common.
Russian Economic Development Minister Maxim Oreshkin was quoted by Russia news agency TASS as saying the resiliency of U.S. shale to lower crude oil prices was putting a ceiling on the price of oil.
"The reasons for decline of oil prices include several factors -- quite aggressive production growth in the United States, and rumors associated with a possible change of OPEC tactics," he said.
The Organization of Petroleum Exporting Countries is about three months into a six-month agreement to keep production steady at around 32.5 million barrels per day. Libya and Nigeria are exempt from the agreement because of a need for oil revenue to finance national security operations and Iran has room to grow in order to regain a market share lost to sanctions. Compliance with the deal is strong, though several analysts have said the devil is in the details.
"OPEC production cuts -- which notably fall short of the original target envisaged by the organization -- appear to serve mainly as a psychological support to oil prices," Leonardo Maugeri, a senior fellow with the Geopolitics of Energy Project at Harvard University, said in a recent note.
On the rumors surrounding OPEC's next move, former U.S. Assistant Secretary of Energy Charles McConnell told Russian news agency Sputnik the production group may be holding its ground.
"I think [the production cut deal] will be extended," he said, adding it likely won't have a dramatic impact on crude oil prices.
The terms of the agreement, signed in November and enacted in January, said the deal could be extended for another six months to take into account prevailing market conditions.
"This rumor, of course, affects expectations," Oreshkin said.
Russia is party to the production agreement as a non-OPEC member, though its contribution has been fluid.