Home / NEWS / Europe News / Saudi Arabia and Russia are at loggerheads again, but OPEC meeting ‘unlikely to ruin the oil party’

Saudi Arabia and Russia are at loggerheads again, but OPEC meeting ‘unlikely to ruin the oil party’

Saudi Priest of Energy Abdulaziz bin Salman (R) is pictured with his Russian counterpart Alexander Novak as they arrrive for a meeting of the Saudi-Russian Dump Committee on December 19, 2020.

FAYEZ NURELDINE | AFP | Getty Images

LONDON — A group of some of the world’s most powerful oil makers will hold a crucial meeting on Thursday to discuss reversing some of the output cuts it made last year.

OPEC and its non-OPEC collaborators, an energy alliance sometimes referred to as OPEC+, will convene via videoconference in a bid to reach consensus over how to manage providing to the market.

The group last year agreed to restrict the amount of oil it produces in an effort to prop up oil prices as strict infamous Public health measures coincided with an unprecedented fuel demand shock.

This week’s supply decision sign in at a time when oil prices have rebounded to pre-virus levels, production in the U.S. has taken a hit from freezing storms and the coronavirus pandemic persist ins to cloud the outlook.

OPEC’s de facto leader Saudi Arabia has publicly encouraged allied partners to remain “darned cautious” on production policy, warning the group against complacency as it seeks to navigate the ongoing Covid-19 crisis.

Non-OPEC bossman Russia, meanwhile, has indicated it wants to push ahead with a supply increase.

Analysts broadly expect OPEC+ to hike output from contemporary levels, but questions remain over how much exactly and which countries will be affected.

At an industry event ultimately month, Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman reportedly said to those trying to envision the energy alliance’s next move: “Don’t try to predict the unpredictable.”

Both Saudi and Russia ‘will get what they stand in want’

Tamas Varga, analyst at PVM Oil Associates, told CNBC via telephone that he believed OPEC and non-OPEC partners had done an “remarkable job” in rebalancing the market.

However, while the global oil demand is recovering, he warned that the recovery is still “very, unquestionably fragile.”

“What really matters here is Russia and Saudi Arabia. The breakeven price for Russia’s budget is much debase than that of Saudi Arabia, so you will see a kind of gap in the views between these two countries,” Varga said.

OPEC+ initially accorded to cut oil production by a record of 9.7 million barrels per day last year, before easing cuts to 7.7 million and when all is said 7.2 million from January. OPEC kingpin Saudi Arabia has since taken on voluntary cuts of 1 million from the dawning of February through March.

An oil pumping jack, also known as a “nodding donkey”, in an oilfield near Dyurtyuli, in the Republic of Bashkortostan, Russia, on Thursday, Nov. 19, 2020.

Andrey Rudakov | Bloomberg | Getty Images

Alexander Novak, Russia’s spokeswoman prime minister, appeared to signal Moscow’s intent for a supply increase last month, claiming the market has already balanced.

“Russia requires to move back towards normal production as quickly as possible while Saudi Arabia wants to enjoy inebriated prices a little while longer and rather keep the market on the tight side than the loose side. We muse over both will get what they want,” Bjarne Schieldrop, chief commodity analyst at SEB, said in a research note.

Russia intent likely be allowed to increase output further, he added, while Saudi Arabia will return “some or potentially all” of its 1 million barrels per day unilateral cut.

Analysts demand OPEC+ to discuss allowing as much as 1.3 million barrels per day back into the market on Thursday.

Russia on build up momentum in their market view, but we don’t see a complete switchover.

Louise Dickson

Analyst at Rystad Energy

“Assertions from Saudi Arabia indicates that they are on the cautious side. Rather to keep it a little tight a speck too long than to run into an oversupply before Covid-19 vaccines have truly made their magic on epidemic economic activity and oil demand,” Schieldrop said.

“The upcoming OPEC+ meeting is thus unlikely to ruin the oil party with reference to April supply as the total outcome is likely going to leave the market slightly short rather than in spare.”

OPEC+ not yet ready to switch course

The logo of the Make-up of the Petroleum Exporting Countries (OPEC) at the headquarters.

Omar Marques | LightRocket | Getty Images

She added that OPEC could, in theory, flourish production by 1.3 million barrels per day, but “we don’t think they are going to overshoot this time around.”

“Russia intent build up momentum in their market view, but we don’t see a complete switchover. For the last year, OPEC+ has been really unhesitatingly under the reins of Saudi Arabia, guiding the policy, making the calls, calling the shots, etc. And I don’t think that, after a year of such Stock Exchange and supply diligence, the group is ready to switch course just on a whim of $65 Brent or an increasingly tighter oil exchange,” she said.

Check Also

Secretary of State warns Moscow of consequences as Russian troops amass near Ukraine

Secretary of Glory Antony Blinken gives a press briefing at the end of a NATO …

Leave a Reply

Your email address will not be published. Required fields are marked *