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The partnership within the OPEC + alliance has shown new signs of tension after Russia lobbied the group led by Saudi Arabia for it to delay the decision on the issue. future of their production cuts.
The unusual recommendation to cancel next month's meeting means that the group will probably not decide to extend its supply restrictions until the end of June, just days before they expire.
During talks in Baku, Azerbaijan on Monday, the Russian Minister of Energy, Alexander Novak, convinced the committee responsible for the reduction of production that the April meeting planned would be too early to agree on. An extension. Khalid Al-Falih, the Saudi energy minister who was initially in favor of a decision at the time, nodded, saying "April will be premature".
For the moment, the supply restrictions that brought Brent to 25% gross this year are secure and the nations present in the Azeri capital have announced that they would go beyond the cuts announced in the months to come up. The cancellation however remains the latest in a number of disagreements between the two largest and most powerful members of the 24-nation coalition.
Although the Organization of the Petroleum Exporting Countries has supported an extension, with members including Iraq, who support in camera, Novak remains opposed, according to a delegate, who asked not to be appointed because the interviews were private.
If this difference can not be resolved in the coming months, it is organizing a very ambitious meeting in Vienna from 25 to 26 June, which could give oil sector operators very little time to adapt to a major change in the industry. offer.
"The need for close relations between Saudi Arabia and Russia has diminished," said Andrew Dodson, founder of hedge fund speculator Philipp Oil. "The delay of the OPEC meeting seems to indicate a reluctance of Russia to engage in more cuts and leave any decision as late as possible before committing more."
Since OPEC ended decades of rivalry by forging an alliance with Russia in late 2016, the cordial relationship between Novak and Al-Falih has been one of the defining features. The two men ushered in an unprecedented period of cooperation that has reshaped the global oil market and laid the foundation for a new geopolitical partnership expanded to cooperation on Syria and mutual investment.
However, there is an imbalance at the heart of the alliance. Saudi Arabia needs its oil to sell for $ 95 a barrel to cover this year's public spending in an economy that relies almost entirely on oil. Russia is more resilient, with a more diversified industrial base and a less inflated state, which means that it bases its 2019 budget on a gross of $ 40.
Since cuts in OPEC + production are entering their third year (originally scheduled for six months), Moscow has shown less enthusiasm. Saudi Arabia's criticism is moving slowly towards its production goal. On March 12, Russian producers had implemented half of their announced cuts, leaving them only a few weeks to do the rest.
Russia will take a wait-and-see approach on the opportunity to extend the agreement on OPEC + as the market has reached a fragile balance, Novak said in an interview with Bloomberg Television on Sunday.
"Currently, the price is acceptable for all parties, both consumers and producers," Novak said. Uncertainties, including fluctuations in Venezuelan production in times of political and economic crisis, make it difficult to say what measures the group should take in the second half of the year, he said.
This contrasts with the message of Al-Falih, who said at a press conference in Baku that work to rebalance the oil market was not done at all, as US stocks remained well above normal . The kingdom will continue to cut deeper than necessary under the deal until the end of April, he said.
OPEC Secretary General Mohammad Barkindo on Tuesday sought to minimize uncertainties related to supply problems in Venezuela and Iran.
Venezuelan Petroleum Minister Manuel Quevedo badured him in Baku that Venezuela was tackling the consequences of power cuts to the country's oil industry, Barkindo said in an interview with Bloomberg Television. Despite US sanctions on the Iranian energy sector, it is "virtually impossible" to completely stop Iran's oil exports, he said.
"The Saudis prefer to keep the cuts and just announce immediately," said Amrita Sen, chief oil badyst at Energy Aspects Ltd., in an interview with Bloomberg Television. The kingdom "will do nothing unilaterally and Russia represents the largest of the non-OPEC countries".
The events in Baku certainly do not signal the end of the OPEC + agreement or the partnership between Russia and Saudi Arabia, "but there is a lot of uncertainty at the moment" and all members of the group are gaining money. time, said Sen.
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