Russia to increase oil output amid Saudi’s additional voluntary cuts
At the beginning of January, OPEC+ announced the details of the latest agreement between the world’s largest oil producers. Saudi Arabia is set to reduce its production by an additional million bpd, while Russia is going to slightly increase output.
The global oil market is resting on an uncertain truce between Russia and Saudi Arabia, says Times Now adding that the deal was stitched together after some discomfort, and the peace between the two countries seems fragile. In March 2020, Riyadh and Moscow were locked in a historic showdown, which wiped oil prices out by two-thirds at the peak of their sparring.
However, now Saudis have agreed to reduce oil output by a million bpd, while Russia will raise production by 65,000 bpd in February and March. Experts assume that it may be Turkey’s expansionism in the neighbourhood that has nudged Saudi leaders closer to Kremlin on the geopolitical front.
Russia’s Deputy Prime Minister Alexander Novak and Minister of Energy of Saudi Arabia Prince Abdulaziz bin Salman had a rare in-person meeting during the pandemic in order to deepen cooperation. According to the Saudi minister, the OPEC+ deal, which has lasted for almost nine months, will continue until April 2022 with a possible extension until the end of 2022.
Saudi Arabia is sceptical about a quick recovery, and the latest press release of OPEC+ reflects the stance of its kingpin. “Rising infections, the return of stricter lockdown measures and growing uncertainties have resulted in a more fragile economic recovery that is expected to carry over into 2021,” reads the statement. It also warns about “prevailing weak demand and poor refining margins”.
At the same time, Russia’s position is chasing a higher share in the global output to counter the threat of shale gas. Moscow is betting on a rapid economic recovery followed by a recovery in oil demand. Deputy Prime Minister Alexander Novak expects that demand will recover during 2021. “It is still below the pre-crisis level by about 6-7 million bpd. During 2021, there will be 3-5 million barrels of demand growth,” he said. “We see that the market is quite optimistic. This is due to the stimulating measures that many countries are introducing, due to vaccinations, so we believe that today there is enough positive regarding both prices and the balance of demand and supply.”