MTS Help Center

Despite thorny U.S.-Russia relations, the U.S. may press Russia and other producers to expand on their just-announced deal to increase crude output, as the U.S. attempts to cut off Iran from the world oil market.

U.S. Energy Secretary Rick Perry is expected to meet with his Russian counterpart, Energy Minister Alexander Novak, in Washington on Tuesday. Both are speaking at the World Gas Conference.

Novak arrives in the U.S. just days after he co-chaired a Vienna meeting between OPEC and non-OPEC producers, where they agreed to add more oil to the market. Analysts say the agreement calls for producers to return somewhat less than 1 million barrels a day to the market, though Saudi Arabia says it will be about 1 million barrels a day and Russia had initially sought a 1.5 million-barrel increase. Novak told CNBC on the weekend that the hike was sufficient for now.

However, Perry told reporters Monday the agreement “may be a little short” of what is needed to prevent shortages. Analysts expect sanctions against Iran to remove about 500,000 barrels a day from the world market by the end of the year.

But other outages are also a concern. Venezuela, for example, was down about a half million barrels a day this year, as of May. Libya lost 450,000 barrels per day in June because of attacks on its two largest export terminals. The outages are expected to be temporary, and the Libya National Army reported that it has regained control, but it's unclear how stable they will be. There was also a surprise outage of 360,000 barrels a day in the Canadian oil sands due to a transformer failure, and that could extend through July.

In his interview with CNBC Saturday, Novak discussed the difficulty of Iran’s sanctions. Russia is also living under U.S. sanctions for its invasion of Ukraine and its election meddling.

Cohen said, “The broader thing is the sanctions have a potential to get much worse on Russia. I don’t know how friendly a meeting it will be."

In a note, she said while it remains to be seen exactly what Russia will seek in return, "sanctions relief seems to be a safe assumption. Russia’s strategic influence continues to expand 18 months after the initial production agreement was inked, with Novak stating that the Moscow-Riyadh partnership now extends well beyond oil."

The meeting between the two energy officials could also be a step along the path to an official meeting between Trump and Russian President Vladimir Putin.