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Russia, Saudi Arabia intensify oil diplomacy before OPEC + meeting

Russian President Vladimir Putin (L) meets with Saudi Arabia's Crown Prince Mohammed bin Salman in Riyadh, Saudi Arabia on October 14, 2019. (Photo by Alexey NIKOLSKY / SPUTNIK / AFP) (Photo by ALEXEY NIKOLSKY / SPUTNIK / AFP via Getty Images )


Russia and Saudi Arabia held another and unusual phone call this week to discuss the OPEC + deal, after officials from the group on Friday warned of the potential for a weaker oil market in 2021.

President Vladimir Putin and Saudi Arabia’s Crown Prince Mohammed Bin Salman spoke on Saturday in what the Kremlin said was a continuation of a conversation on October 13. The two discussed the OPEC + cooperation “in detail”, the Kremlin said in an email statement.

“Both sides reiterated their readiness for further close coordination in this area in order to maintain stability in the world energy market,” the Kremlin said.

The latest call came two days before several OPEC + ministers are ready to discuss the implementation of production cuts during a meeting of the so-called Joint Ministerial Monitoring Committee. The steering group meets monthly to analyze the market with their recommendation later reviewed by the entire group. The next full OPEC + ministerial meeting is scheduled for 30 November and 1 December.

Lowered expectations

The world’s demand for crude oil from OPEC is declining as demand prospects weaken

Source: Bloomberg calculations using OPEC, IEA and EIA data

Brent crude oil has been traded roughly between $ 40 and $ 45 per barrel. Barrel since July, limited by the impact of the coronavirus outbreak on global energy needs and supported by the OPEC + production cut. The group includes members of the Organization of the Petroleum Exporting Countries, led by Saudi Arabia, and several independent countries, including Russia and Kazakhstan.

Putin and Saudi leaders have not spoken twice in the same week since April, when Moscow and Riyadh tried to reach an agreement to end a devastating oil price war. US President Donald Trump eventually brokered a ceasefire between the two and also participated in some of the calls.

This week’s intensive oil diplomacy comes as Coronavirus cases are rising in Europe and America, weighing on demand expectations over the next few months. Oil traders are now questioning whether the market would be able to absorb the planned OPEC + production increase of almost 2 million barrels per day in January.

“If OPEC continues and adds production as planned in January, we will no longer draw raw stocks,” said Torbjorn Tornqvist, co-founder of the large oil trading house Gunvor Group. “I suppose the market is now pricing the likelihood of them postponing the increase in production.”

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