Oil Prices broke yesterday after a Tass article that suggested that Russia and OPEC, at the upcoming meeting in Algiers, may discuss the possibility of increasing oil production by more than 1 million barrels per day, quoting Russian Minister of Energy Alexander Novak. Yet, trade war fears and the fears of the impending refinery maintenance season brought prices back down. Yet, reports overnight that Saudi Arabia is comfortable with higher prices and increased geopolitical risk after Israel shot down a Russian plane in Syria is bringing oil right back up.

Is Russia meddling in the oil market? Yes they are! Yet, why the market broke on a report that OPEC and Russia would raise output by a million barrels broke the market is a puzzlement because it should be clear that 1 million barrels of oil will not be enough to offset losses from Iran, not to mention Venezuela. In fact, Bloomberg news reports that Iranian crude exports have dropped more than 40% since April, and that is a bigger-than-expected plunge in sales is tightening global oil markets.

It is not even clear whether Saudi Arabia will go along with a million barrels a day increase. In fact, afterwards Reuters reported Saudi Arabia indicated it was comfortable with a higher price range oil prices rallied.

Yet, reports that Israel shot down a Russian plane, killing 15 people, could be adding to the geopolitical risk buying as well. Bloomberg reported that “Russia warned angrily it may respond to “hostile” actions by Israel after one of its military reconnaissance planes was downed mistakenly by Syrian forces fighting off an attack by Israeli warplanes. The spike in tensions came a day after Russia called off a campaign against the last major opposition-held area in Syria, preventing for now an escalation in the seven-year war, after President Vladimir Putin and his Turkish counterpart Recep Tayyip Erdogan reached a deal on Monday. Still, unlike a 2015 incident in which Turkey shot down a Russian warplane, sparking a yearlong breach in ties, the Kremlin gave no sign the latest episode would lead to broader consequences.” Dow Jones said that Russian Defense Minister says Moscow reserves the right to respond to Israeli actions.

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