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Saudi-Russia Rift Kills Oil Cut Deal

Copyright © 2021 Energy Intelligence Group

Crude oil prices plummeted on Friday as "Opec-plus" talks on production cuts collapsed because of irreconcilable differences between major producers Saudi Arabia and Russia. The talks in Vienna failed to deliver an agreement on additional cuts to counter the effects of the coronavirus epidemic. Furthermore, current production cuts of 2.1 million barrels per day are now set to expire at the end of March. Brent crude futures, which have already fallen sharply since January, closed $4.72 lower at $45.27 per barrel. The Saudis had been pushing for additional production cuts of 1.5 million b/d through the end of this year, but Russia remained unwilling to go beyond an extension of the existing cuts until the end of June. Saudi Arabia -- Opec's de facto leader -- had been pushing for decisive action to support prices as global demand for oil falls as a result of an economic slowdown triggered by the coronavirus epidemic. The Saudis insisted that non-Opec members of the Opec-plus alliance should shoulder 500,000 b/d of the proposed additional cuts of 1.5 million b/d (IOD Mar.6'20). But Russia -- by far the biggest non-Opec producer in the alliance -- was equally adamant that it was too early to assess the impact of the coronavirus on oil demand. Moscow argued that an extension of the existing cuts was the best course of action, pending a further review of market conditions in June. The collapse of the talks in Vienna looks set to keep prices well below $50 and extend the sharp losses already seen since January. Ominous remarks by the Saudi and Russian energy ministers on Friday suggested that their countries may now send more oil out into an oversupplied global market. "We will keep you wondering," said Saudi Arabia's Prince Abdulaziz bin Salman, when asked about the kingdom's production plans.

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