Sputnik - Oil prices continued to tumble on Monday after last week�s downward pull. This comes amid reports of rising production in Russia and an increase in US drilling activity that is creeping to its highest level in more than three years. Sputnik spoke with Marc Ostwald, Global Strategist at ADM Investor Services about the issue.




Sputnik: The Arabs announced that they would be upping the production prior to�the OPEC meeting; do you expect the rest of�the members of�OPEC to�get onboard with�that and also up�their production?

Marc Ostwald:�To a certain extent. One always has to�have another look at�how much extra capacity do countries have. A lot of�countries, even in�the OPEC, in�the Arab part of�the OPEC blocks don�t have a huge amount of�extra capacity. So yes, I would expect them to�do that above�all, because what the debate is then going to�be is the usual old thing about�OPEC quotas.

We can�t let you have a massive increase in�your relative quotas, so this old chestnut, which is a thing of�days of�yore, comes back to�the table and it would be particularly interesting to�see how this particular discussion looks, and also it would be interesting to�see whether there are any tensions evident between�Saudi Arabia and Iran � which normally don�t surface at�OPEC meetings, even during�the Iran, Iraq war. That was rarely a topic of�discussion for�the OPEC.

Sputnik: You mentioned that the Chinese have a voracious appetite for�fossil fuels of�course and do you think that the Chinese market is sufficient to�keep Iran�s oil market afloat even if the Europeans, either the governments or the companies themselves, say that they will pull out�of the JCPOA?

Marc Ostwald:�Probably not but�primarily because the biggest net exporter, net export increase in�China is actually coming from�Russia and not from�Iran. Yes, they have reduced some of�the demand from�the�OPEC countries�and they have picked up�a bit from�Iraq and from�Iran, but�the biggest increase, by�far, have been from�Russia. You can see it if you look at�the source of�origin and you have a look at�the pipeline to�China in�Russia, it�s the only one where production relative to�2016 or output relative of�exports since�2016 has almost doubled.

Sputnik: Do you see energy partnership getting stronger between�China and Russia, as�Russian energy minister said that China is looking into�entering with�partnership with�Russia on�liquefied natural gas, the Arctic 2 project?

Marc Oswald:�The Arctic 2 project, I think if anyone here in�the Western world was paying any attention over�the weekend to�some of�the huge announcements were made, like�that one, at�the�Shanghai Cooperation Organization meeting, which people here are determined to�call a security meeting for�some reason, I don�t know why, as�it�s long past�that.

They would be realizing that what we are getting is a really strong grouping along�what I call �Pipelanistan,� Russia, China, to�some extent including India and Iran, and that is a very powerful grouping which will have a lot of�internal demand even if we might question whether some of�the energy pooling might not necessarily be influential but�I think in�the long run that is a very serious project and they will go a long way. It�s in�Russia�s interests, after�all, because the problems which are being put up�above all by�the United States mean that they need to�look elsewhere for�the investment money, which is still very much needed, huge amount of�money is still needed to�develop the Russian resource area.