In the face of mounting speculation about tensions between Saudi Arabia and its oil ally Russia, Saudi Energy Minister Prince Abdulaziz bin Salman categorically dismissed such talk and instead praised the coordinated efforts of both nations to remove barrels from the market.
The primary objective of this joint action is to stabilise oil prices amidst the backdrop of declining prices, market volatility, and the global economic concerns triggered by the Russian invasion of Ukraine.
On Monday, Riyadh announced the extension of its production reduction of one million barrels per day (bpd), which initially began in July, throughout the month of August to bolster prices. Coinciding with this move, Russia, an ally within the OPEC+ group of oil producers, decided to slash its exports by 500,000 bpd in August.
Speaking at an OPEC seminar held in Vienna, Prince Abdulaziz bin Salman emphasised the significance of the synchronised announcement, referring to it as "quite telling".
He further elaborated that the collaboration between Saudi Arabia and Russia aims to counter any scepticism surrounding their bilateral relationship.
"Part of what we have done with the help of our colleagues from Russia was also to mitigate the cynical side of the spectators on what is going on between Saudi Arabia and Russia," Prince Abdulaziz stated.
Historically, Moscow and Riyadh have not always seen eye to eye on oil quotas. Russia has displayed less enthusiasm than Saudi Arabia when it comes to cutting production, as it heavily relies on oil revenues amid its war in Ukraine and Western sanctions.
However, the recent production cuts have failed to generate the desired increase in international oil prices.
Analysts indicate that Saudi Arabia requires oil prices to reach $80 per barrel in order to balance its budget, a figure significantly higher than current averages.
On Wednesday, Brent North Sea crude, the global benchmark, was trading at approximately $75 per barrel.
Estimates indicate that Russia has yet to fulfil its commitment to reducing production by the agreed-upon volume, with its focus primarily on Asian markets such as India and China.
Faced with accusations of not meeting production reduction targets, the Saudi minister stated that the OPEC+ alliance has called for the involvement of "independent sources" to verify Russia's production figures.
He added, "Moscow has committed to this exercise, and they are going to be doing it on a monthly basis."
When questioned about the subdued market reaction to the recent production cuts, Prince Abdulaziz bin Salman urged patience and deplored the prevailing "negativism". He reiterated the commitment to take whatever steps are necessary to stabilise prices, stating, "We will do whatever is necessary, whatever it takes."
It is worth noting that OPEC did not extend invitations to journalists from three major financial news outlets—Bloomberg, Reuters, and The Wall Street Journal—to cover the talks.
Overall, Saudi Arabia and Russia are seeking to dispel rumours of discord by highlighting their united efforts to address the challenges facing the global oil market. Despite some disagreements in the past, both nations are working towards stabilising oil prices and mitigating the impact of geopolitical developments on the market.
The focus now turns to the effectiveness of these measures and the extent to which they can successfully restore stability and balance to the oil industry.
