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Leonid Bershidsky

The OPEC Oil Deal Sells Fake News for Real Money

Saudia Arabia and Russia have mastered the art of regulating oil prices with verbal interventions.
No chill on Russia's oil revenue.

No chill on Russia's oil revenue.

Photographer: Andrey Rudakov/Bloomberg

It's hard to blame Russia for using its propaganda machine to help build a post-fact world when its economy depends on a post-fact market -- the oil one. The market's reaction to news from the Organization of Petroleum Exporting Countries highlights its spurious mechanics.

Bloomberg News reported recently that Russia as a country made $6 billion just by talking to OPEC about cutting its oil output: News about the negotiations drove up the price. Now, Russia has agreed to a cut by 300,000 barrels per day by January "if technically possible." It looks like a lot -- a quarter of the total cut OPEC members have agreed among themselves -- but then Russia's output increased by 520,000 barrels a day between the end of August and the end of October, reaching an absolute record level. Russia has been making money on the increasing price while growing production -- the best of both worlds thanks to some deft news manipulation and nothing else. Now, even if Russia cuts output by about 2.7 percent of the current level, as it has promised, it will still reap a profit if the price of crude holds at the current level -- about 7 percent higher on Thursday morning than three days before.