Saudi Arabia works on convincing Russian Federation to join oil cuts

Marcus Newton
December 7, 2018

In a tweet on Wednesday, the president warned OPEC against restricting oil flows and said the world does not want to see higher oil prices.

Saudi Arabia has endorsed a moderate oil production cut that will see Opec and its allies slash around a million barrels per day of crude so as not to upset the markets too much and also placate the US President who asked the producers' not to restrict supply.

"We don't want to shock the market", he added, noting that cutting about a million barrels per day for the whole group should be adequate. The cartel and its allies are meeting in Vienna this week, trying to make a tough choice to cut output and support prices, risking the loss of more market share to the US.

The meetings come a day after it was reported that global carbon emissions will jump to a record high in 2018. But they're contending with vociferous opposition from the USA president, who's taken to using his Twitter account to berate the group's policies and sees low oil prices as key to sustaining America's economic growth.

That left the oil market dangling in uncertainty before non-OPEC allies join the group for a second day of talks on Friday.

Oil prices briefly pared losses after government data showed USA crude stockpiles fell by 7.3 million barrels in the week through November 30.

Saudi Arabia sought to persuade Russian Federation on Wednesday to cut oil production substantially with OPEC next year in an attempt to arrest a decline in the price of crude and prevent another global glut.

The long rally in oil prices lasted until October.

Over the past two months, however, prices have plunged again. Al-Falih said his preference was for a reduction extending into the third quarter. "Ideally, everyone should join equally". Saudi Arabia, Russia and the UAE have raised output since June after Trump called for higher production to compensate for lower Iranian exports due to new USA sanctions.

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OPEC is also riven by internal conflict, especially between regional rivals Saudi Arabia and Iran.

"We assume a cut of around 1.0 million barrels per day in the first quarter of next year, using October 2018 production levels as a reference".

Bank of America said it expected Brent and WTI prices to average $70 and $59 per barrel respectively in 2019. "That is acceptable for most OPEC countries". Another factor is surging USA production, which has reached record highs of 11.5mb/d, or more than a 10th of global output, a figure that is expected to rise further in 2019.

Since overtaking Saudi Arabia, many in Washington feel the United States no longer needs to shackle itself to Riyadh.

The killing of journalist Jamal Khashoggi at the Saudi Arabian Consulate in Instanbul is expecting to have an effect on negotiations at the meeting.

Otherwise, he added, the USA official has adopted an unprofessional, naïve, and meddlesome approach.

"They should know that OPEC is not part of their secretary of energy", he said.

"The impression that the group can't really come to a decision without first checking with Moscow is going to be hard for some members to swallow", said Derek Brower, a director at consultant RS Energy Group.

Russian Energy Minister Alexander Novak was quoted saying Thursday morning that it would be "much more difficult" for Moscow to cut oil output over the winter because of the cold conditions at Russian oil fields.

Other reports by MaliBehiribAe

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