OPEC+ deal saved ‘more than 2 million’ jobs in the US, says Russia’s sovereign wealth fund chief

The OPEC+ deal that’s supporting oil prices could save millions of U.S. jobs, according to the chief executive of Russian sovereign wealth fund RDIF.

After days of discussion, OPEC and its allies reached an agreement on Sunday to cut production by a record 9.7 million barrels per day. It will be in effect from May 1 to the end of June, following which restrictions will be loosened.

The alliance will also meet on June 10 to reassess the situation.

U.S. President Donald Trump, who was involved in the negotiations, said in a tweet that the deal “will save hundreds of thousands of energy jobs in the United States.” 

Kirill Dmitriev, CEO of the Russian Direct Investment Fund, said Trump was “modest” in saying that.

“We believe that more than 2 million jobs in the U.S. will be saved as a result of President Trump’s leadership on this,” he told CNBC’s “Capital Connection” on Monday.

“The total number of jobs in the U.S. oil and gas industry is 10 million. But if you count … other industries affected by this, you’re talking about huge job numbers,” he said, adding that Russian jobs will also be saved.

America’s shale patch was seen to be vulnerable when oil prices went into a free fall amid the Russia-Saudi Arabia price war, which was triggered in early March, when Moscow refused to approve a proposal to cut production. Riyadh, in response, offered discounts on oil and prepared to ramp up supply.

Analysts said Russia may have taken the action in order to target the U.S., which has higher production costs and struggles to break-even when prices are under $50 a barrel.

The Siem Garnet tugboat delivers a Japanese-made HAKURYU-5 semi-submersible drilling rig owned by Gazprom Neft from Vietnam to develop the Ayashsky offshore oil field in the Sea of Okhotsk as part of the Sakhalin III project.

Yuri Smityuk | TASS | Getty Images

Oil traded mixed on Monday evening in Asia, with U.S. crude futures up 0.13% at $22.79 and Brent dropped 2.06% to $30.83.

While the oil benchmarks are still down by more than 50% from the beginning of the year, RDIF’s Dmitriev said the OPEC+ agreement supports oil prices “dramatically.”

“Without this deal, oil prices would have gone a lot below $10 a barrel,” he said. It won’t push prices “exceptionally high,” in part because of demand destruction due to the coronavirus crisis, but does provide a “floor” going forward, he added.

15 million bpd reduction

Separately, he said he believed the total reduction in oil supply will be more than 15 million bpd if other non-OPEC+ producers are included. He pointed to the decline in U.S. output that has not been formalized as cuts, as well as lower supply from Norway and Brazil. 

“You look at other nations, if you add up everything that will be happening with their declines of oil, you definitely have more than additional 5 million barrels,” he said.

That sentiment was echoed by Frederick Kempe, president and CEO of the Atlantic Council.

“You could have further agreements and announcements by G-20 members tomorrow,” he said. “Some say it could add up to as much as 18, 19 million bpd.” Even then, he noted that the market is facing bigger falls in demand for oil.

Still, Dmitriev said the agreement is a “very important step forward.”

“I think nations can act again if needed. It is this unity, it’s the complete consensus of this deal,” he said. “It’s a message that, if (it’s needed), our countries are willing to act together and work together to solve this big issue.”

— CNBC’s Pippa Stevens contributed to this report.

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