Despite tightening Western sanctions on Moscow and a possible European Union embargo on Russian oil imports, Saudi Arabia has indicated it will side with Russia as a member of the oil-producing OPEC + group.
Prince Abdul Aziz bin Salman, the energy minister, told the Financial Times that Riyadh was “hoping to reach an agreement with OPEC +, which includes Russia”, urging the producers’ alliance to “realize the value of the world”.
A new manufacturing deal is on the agenda as OPEC + output quotas expire in three months in April 2020 as energy consumers struggle to reach their highest level of oil prices in a decade.
Prince Abdul Aziz’s remarks are an important sign of Russia’s support for a traditional US ally as the West seeks to isolate the country and reduce its oil production, raising questions about its place in the OPEC + group.
Riyadh is resisting Western pressure to increase crude output to help reduce prices in the wake of Russia’s invasion of Ukraine, with no shortage of supplies.
Prince Abdul Aziz said it was too early to say what the new deal might look like in the face of market uncertainty, but added that OPEC + would increase production “if there is demand”.
“It simply came to our notice then [an agreement]”But what we do know is that what we have succeeded in giving is enough to tell people that there is a qualification, there is value in being there, working together,” Prince Abdul Aziz said in an interview.
OPEC + is stuck in its 2020 deal, under which coalition members increase production by a modest amount of 430,000 barrels per month.
But Russia’s output has declined since the start of the Ukraine war, dropping from about 11 million b / d in March to an average of 10mn b / d in April, according to data provider OilX.
The International Energy Agency predicts that this could be further reduced if Western powers impose tougher sanctions to reduce Europe’s dependence on Russian power, including a possible EU embargo on oil imports. India, however, has increased its oil imports from Russia since the start of the war.
International benchmark Brent crude traded at 11 112 a barrel last week.
Saudi Arabia, OPEC’s de facto leader and the world’s top oil exporter, has integrated oil production quotas with Russia through OPEC + since 2016.
The state has tried to navigate a neutral path since Russia invaded Ukraine. Crown Prince Mohammed bin Salman has spoken to Putin twice since the attack, and this month he and King Salman congratulated the Russian leader on the day the country marked the Soviet victory over Nazi Germany.
Prince Abdul Aziz has blamed global refining capacity and lack of taxes for the rise in petrol prices.
“The determinant of the market is the power of the refinery, and how you unlock it,” he said. “For at least the last three years, the whole world has lost about 4 million barrels of refining capacity, of which 2.7 million have been covid since the beginning.”
Some OPEC + members have consistently failed to meet their production quotas, and Saudi Arabia and the United Arab Emirates are the only producers that have the potential to significantly increase production.
After Russia launched its aggression in February, the West initially avoided imposing sanctions on Russia’s energy resources because of Europe’s heavy reliance on the country’s gas and oil exports.
The United States and the United Kingdom banned oil imports from Russia in March. EU states, however, remain divided over measures to cut off Russian oil supplies, and this month the EU dropped a proposal to ban the shipping industry from carrying Russian crude.
Prince Abdul Aziz said politics should be kept away from OPEC +, adding that the alliance would need to bring “chain coordination” in the future amid the coronavirus lockdown in China, global growth and uncertainty about the supply chain.
He said that in order to reduce production and refinery capacity constraints, governments should encourage industry to invest in hydrocarbons even as countries switch to clean energy sources.
“For this situation, people need to sit together, focus, find a masquerade and bring out the so-called political correctness. . . It has to do with the existing reality and try to find a solution. “
Additional report by Tom Wilson in London