Russia and Saudis hint at oil price cooperation
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Saudi Arabia and Russia signalled yesterday they were ready to cooperate to help stabilize the oil market after calls with United States President Donald Trump to discuss the slump in prices triggered by the end of a deal last month to curb output and a collapse in demand.
After the deal collapsed, Russia and Saudi Arabia both said they were ready to raise production but Russian Energy Minister Alexander Novak said yesterday it had no plans to crank up its crude output.
A senior Gulf source familiar with Saudi thinking, meanwhile, said yesterday that Saudi Arabia supported cooperation between oil producers to stabilize the market but it was Russia’s opposition to a proposal last month to deepen oil supply cuts that caused the market turmoil.
Oil prices have halved to under US$26 a barrel since Saudi Arabia, de facto leader of OPEC, and other producers led by Russia, failed to agree a joint supply response to the slump in fuel demand caused by the coronavirus pandemic.
Trump said on Wednesday he had talked with Saudi and Russian leaders and believed the two countries would make a deal to end their price war within a few days, lowering output and bringing prices back up.
As a result, oil prices jumped 10 percent yesterday.
Stabilizing the oil market through output cuts is likely to be tough in the current environment because oil demand has fallen by almost a third, or at least 20 million barrels per day, meaning significant reductions would be required.
Russia and Saudi Arabia have blamed each other for the price collapse.
Riyadh wanted to deepen the oil cuts because of the fallout from coronavirus but Moscow refused to join new reductions, preferring to extend the existing agreement.
Saudi Arabia then slashed its crude export prices, said it would raise output to maximum capacity and has tried to sell cheap oil to refiners that buy Russian crude. Saudi supply hit a record above 12 million barrels a day on Wednesday.
While there is little evidence yet of Russia and Saudi Arabia bridging their differences, signs were growing this week that the world’s two biggest oil exporters were preparing to address the situation.
Russian President Vladimir Putin called on Wednesday for global oil producers and consumers to address “challenging” oil markets and the senior Gulf source said the Saudis wanted producers to work together.
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