The Duran’s Alex Christoforou and Editor-in-Chief Alexander Mercouris discuss OPEC Plus and the growing partnership between Russia and Saudi Arabia, which aims to reshape the energy market, and cement Russia’s leadership role in global oil and gas supply.
Russia and Saudi Arabia’s ‘long-term relationship’ WILL survive
The Express UK reports that Russia and Saudi Arabia’s ‘long-term relationship’ will not only survive, but grow, regardless of geopolitical turmoil and internal Saudi scandal…as the energy interests between both nations bind them together.
Ties between Saudi Arabia and Vladimir Putin’s Russia have a “long-term relationship” which is strategically beneficial to both of them, and which underlines their position as the world’s most influential oil producers, alongside the United States, an industry expert has said.
Following concerns about too much oil flooding the market, Saudi Arabia on Sunday performed an abrupt u-turn by deciding to reduce production by half a million barrels a day from December.
This put the Middle Eastern country at odds with Russia, which said it was no clear whether the market would be oversupplied next year, with market analysts predicting the country’s oil producing companies likely to BOOST proaction by 300,000 barrels per day.
But IHS Markit vice chairman Daniel Yergin said the decision was unlikely to jeopardise the relationship between the two allies.
The Saudis have faced significant international criticism in the wake of the killing of journalist Jamal Khashoggi at the Saudi consulate in Turkey.
Speaking to CNBC, Mr Yergin made it clear that Moscow and Riyadh would continue to be closely aligned irrespective of external factors.
He explained: “I think it’s intended to be a long-term relationship and it started off about oil prices but you see it taking on other dimensions, for instance, Saudi investment in Russian LNG (liquefied natural gas) and Russian investment in Saudi Arabia.
“I think this is a strategic relationship because it’s useful to both countries.”
Saudi Arabia and Russia are close, especially as a result of their pact in late 2016, along with other OPEC and non-OPEC producers, to curb output by 1.8 million barrels per day in order to prevent prices dropping too far – but oil markets have changed since then, largely as a result.
The US criticised OPEC, which Saudi Arabia is the nominal leader of, after prices rose.
Markets have fluctuated in recent weeks as a result of fears over a possible drop in supply, as a result of US sanctions on Iran, and an oversupply, as a result of increased production by Saudi Arabia, Russia and the US, which have seen prices fall by about 20 percent since early October.
Saudi Arabia has pumped 10.7 million barrels per day in October, while the figure for Russiaand the US was 11.4 million barrels in each case.
Mr Yergin said: “It’s the big three, it’s Saudi Arabia, Russia and the US, this is a different configuration in the oil market than the traditional OPEC-non-OPEC one and so the world is having to adjust.”
BP Group Chief Executive Bob Dudley told CNBC: “The OPEC-plus agreement between OPEC and non-OPEC producers including Russia and coalition is a lot stronger than people speculate.
“I think Russia doesn’t have the ability to turn on and off big fields which can happen in the Middle East.
“But I fully expect there to be coordination to try to keep the oil price within a certain fairway.”
Markets rallied by two percent on Monday off the back of the Saudi decision to cut production, which it justified by citing uncertain global oil growth and associated oil demand next year.
It also suggested waivers granted on US sanctions imposed on Iran which have been granted to several countries including China and Japan was a reason not to fear a decline in supply.
Also talking to CNBC, Russia’s Oil Minister Alexander Novak indicated a difference of opinion between Russia and the Saudis, saying it was too soon to cut production, highlighting a lot of volatility in the oil market.
He added: “If such a decision is necessary for the market and all the countries are in agreement, I think that Russia will undoubtedly play a part in this.
“But it’s early to talk about this now, we need to look at this question very carefully.”