Russia/Saudi Arabia World Cup opener stimulates crude oil talks
June 14, 2018
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While their two respective countries are competing in FIFA’s World Cup opening game, the leaders of Russia and Saudi Arabia will be discussing oil production targets and increasing cooperation between their nations.
According to Bloomberg News, Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman will discuss how to boost oil production while maintaining their petro-alliance when they meet in Moscow today to watch the soccer World Cup’s opening match between the two countries.
The world’s largest oil exporters are negotiating how to rework their unprecedented, and successful, deal to control oil production as U.S. sanctions on Iran and the collapse of the Venezuelan petroleum industry threaten to send crude skyrocketing. They must also contend with President Donald Trump, who used his Twitter account on Wednesday to attack OPEC for artificially inflating prices.
“This is the most political OPEC meeting in a long time,” said Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd.
Both Saudi Arabia and Russia have proposed plans for the so-called OPEC+ group that would add as much as 1 million barrels a day, about 1 percent of global output, although Riyadh prefers a smaller increase. The back and forth signals major differences remain, even between Riyadh and Moscow, who’ve worked very closely over the past two years.
Reaching an understanding between Russia and Saudi Arabia may prove easier than obtaining a wider agreement among the 24 countries bound by the agreement first struck in late 2016. The Organization of Petroleum Exporting Countries meets in Vienna on June 22 and Iran, Venezuela and Iraq have publicly set themselves against a production increase.
“An output increase by the four main producers (Kuwait, Russia, Saudi Arabia, and UAE) looks inevitable,” Ed Morse, head of commodities research at Citigroup Inc. in New York, said in a note to clients, according to Bloomberg News. But he warned that less than ten days for the meeting the size and timing of any increases was still up in the air.
Tehran illustrated the divide within the cartel on Wednesday when a senior official said that current production levels were adequate and the group shouldn’t bow to U.S. pressure.
“The Trump administration is trying to intervene in the affairs of a sovereign organization,” Iran’s OPEC governor, Hossein Kazempour Ardebili, said in an interview with Bloomberg News. Such attempts have failed in the past and “they will also fail” this time.