Saudi Arabia and Russia reached an impasse on Monday over whether their producers’ alliance should increase oil production amid a new pandemic, delegates said after a day of negotiations ended without agreement.
The Organization of Petroleum Exporting Countries, led by 13 members from Saudi Arabia, met virtually on Monday with 10 Russian-led producers, a group that together was dubbed OPEC-plus, in the first of its monthly meetings to review global oil demand. Last month, they agreed to increase production by 500,000 barrels a day, raising their net cuts since the start of the pandemic to about 7.2 million barrels a day.
On Monday, they were to decide whether to continue to increase production or remain standing.
Saudi Arabia and most of the broader alliance supported stability for at least another month, delegates said. These countries are concerned that a new variant of the Covid-19 virus is threatening the resurgence of the pandemic, while vaccination programs are not progressing as fast as expected.
“Even in this general optimistic environment, I want to ask for caution,” Saudi Energy Minister Abdulaziz bin Salman said during opening remarks ahead of online meetings. “Don’t jeopardize what we have achieved for an instant illusory benefit.”
Moscow, however, pushed for an increase in production of over 500,000 barrels a day, delegates said. Russia sees oil consumption coming back and is concerned about losing market share to American producers, who are not subject to restrictions, these people said.
“We hope that in 2021 we will see a recovery in demand, including as a result of the vaccination that is already underway in several countries,” said Russian Deputy Prime Minister Alexander Novak before the meeting.
The group is due to meet again on Tuesday, hoping to resolve their differences. News of the disagreement lowered oil prices. At the end of the trading session in London, Brent, the international benchmark, fell 0.7% to $ 51.40 a barrel, while West Texas Intermediary had dropped 1.1% to $ 47.90 a barrel.
Saudi Arabia and Russia clashed last year over oil policy, effectively triggering a global price war when they each turned on their taps and flooded the market. This happened exactly when the coronavirus was spreading rapidly from China to the rest of the world. Governments around the world have begun to curb their economies and demand for oil has plummeted.
In the midst of a sharp drop in prices, Saudi Arabia and Russia abandoned their rivalry, and OPEC-plus agreed to record cuts of 9.7 million barrels a day. Part of the agreement provided for the eventual restoration of production in increments of 2 million barrels per day. The first of this additional production went live during the summer, while members agreed last month to bring in another 500,000 barrels a day in January.
Write to Benoit Faucon at [email protected] and Summer Said at [email protected]
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Published in the January 5, 2021 print edition as ‘Saudis, Russia Oil Production Division’.