The world’s largest crude oil exporter, Saudi Arabia, continues to maintain close ties with Russia while the largest oil consumer, the United States, is asking major producers – including the kingdom – to increase supply to the market and help alleviate consumer pain at the pump. While the United States and its Western allies are sanctioning Moscow and banning oil imports from Russia, US President Joe Biden is also turning to Saudi Arabia to ask it to pump more oil, as Americans pay an average of $ 5 per gallon for gasoline.
The Saudis prefer to maintain close ties with Russia in oil policy, as the OPEC + pact and control of a large part of the global oil supply have benefited both OPEC + leaders ̵[ads1]1; the Kingdom and Russia – over the past six months. However, Saudi Arabia could use some thaw in Saudi-US relations under President Biden, who no longer speaks of the world’s best crude oil exporter as a “pariah” state.
The Saudis are maneuvering carefully to keep Russia as an ally in the OPEC + group and possibly improve relations with the United States.
President Biden – desperate to see relief for US drivers ahead of the midterm elections – has made a U-turn against Saudi Arabia and is expected to visit the kingdom this month, which he said on the campaign track would be treated as a “pariah” state during his presidency. But US gas prices of 5 dollars per gallon and the loss of parts of the Russian supply have led President Biden to reconsider and meet Crown Prince Mohammed bin Salman.
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Saudi Arabia has publicly reiterated its “warm” ties with Russia on several occasions since Putin invaded Ukraine, and considers keeping Russia in the OPEC + alliance an important part of oil policy. With Russia leading a dozen non-OPEC producers in the pact, Saudi Arabia has more control over global oil markets with the larger OPEC + group than with OPEC alone.
Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman have discussed their country’s cooperation in the OPEC + oil production pact in a few phone calls since February, and has promised to continue cooperation.
Last month, Russian Deputy Prime Minister Alexander Novak so that Russia could continue its participation in the OPEC + agreement even after it officially expires at the end of this year. Novak spoke after a meeting in St. Petersburg with Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman, who appeared surprisingly on a Russian economic forum.
During that meeting, the Saudi minister said so that Saudi-Russian conditions were «as hot as the weather in Riyadh».
Two weeks before the meeting, Russian Foreign Minister Sergey Lavrov visited Riyadh and met with his Saudi counterpart Prince Faisal bin Farhan Al Saud. The two ministers said that The OPEC + alliance is solidwith a strong level of cooperation.
The recent OPEC + decision to accelerate The increase in production and the rollback of all cuts in August, a month earlier than originally planned, were pushed by Saudi Arabia under US pressure. But the kingdom had to check with Russia first before proposing a redistribution of the September increase in July and August, sources with knowledge of the diplomacy behind the scenes said. Reuters this week.
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Both the Saudis and Russia are benefiting from the OPEC + agreement, so Riyadh wants to keep Russia on board, the sources say.
“The Saudis are enjoying high prices while the Russians need guaranteed support from OPEC + in the current circumstances,” a source familiar with Russian thinking told Reuters.
“Nobody is interested in a market collapse,” the source added.
After the production cuts are completely rolled back next month, a more difficult decision threatens OPEC +: what to do next because Russia is more than 1 million bpd behind the target and may lose more supplies as the EU oil embargo begins at the end of this year.
Neither OPEC + as a group is close to reaching its target production, nor does Saudi Arabia have much spare capacity left to increase production further, as the US and other large consumers want. Under the OPEC + agreement, the Saudi target (as well as Russia’s) is on 11.004 million bpd for August. The kingdom has seldom reached this level, and not for a long period of time. So it is not certain that the Saudis have the ability to pump 11 million bpd or more on a sustainable basis. It is even less certain that the Kingdom can quickly utilize – if it wanted to – into the production capacity of 12.2 million bpd it claims it has.
By Tsvetana Paraskova for Oilprice.com
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