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MOSCOW / DUBAI (Reuters) – Russia and Saudi Arabia reached a private deal in September to boost oil production, but informed the United States ahead of a meeting in Algiers with other producers. , said four sources close to the project.
PHOTO FILE: Saudi Energy Minister, Khalid al-Falih, at the inauguration ceremony of the OPEC Ministerial Follow-up Committee in Algiers on 23 September 2018. REUTERS / Ramzi Boudina / Photo File
US President Donald Trump blamed the Organization of the Petroleum Exporting Countries (OPEC) for high crude oil prices and urged him to increase production to lower fuel costs ahead of US congressional elections on Nov. 6. .
The agreement highlights how Russia and Saudi Arabia are increasingly deciding bilateral oil production policy, before consulting the rest of OPEC.
The sources said that Saudi Energy Minister Khalid al-Falih and his Russian counterpart Alexander Novak had agreed in a series of meetings to raise production from September to December, the oil crude then approaching $ 80 a barrel. It's now over $ 85.
"The Russians and the Saudis have agreed to add barrels to the market in silence, in order not to give the impression that they are acting on Trump's orders to extract more," said a source.
"The Saudi minister told US Secretary of Energy Rick) Perry that Saudi Arabia would increase production if its customers asked for more oil," said another source.
Initially, the two countries hoped to announce an overall increase of 500,000 barrels per day from OPEC led by Saudi Arabia and non-OPEC Russia at a gathering of ministers of the United States. oil in Algiers at the end of September.
But with opposition from some OPEC members, including Iran subject to US sanctions, they decided to postpone any formal decision until an OPEC plenary meeting in December.
PERRY LOOPED IN
Since then, the Reuters news agency announced that Riyadh planned to increase production from 200,000 to 300,000 bpd from September, in order to fill the void left by the decline in Iranian production due to the sanctions .
Russian production rose 150,000 barrels a day in September.
"I would expect Russia's oil production to fluctuate between 11.4 and 11.6 million bpd by the end of 2018 and increase to 11.8 million bpd. later in 2019, "said a source from a major Russian oil company.
According to data from the Ministry of Energy, the Russian produced 11.36 million bpd in September, against 11.21 million bpd in August.
Perry was informed of the Russian-Saudi cooperation project to increase production before the rally in Algiers. He met Falih three times in September and another in Novak. The three did not meet together.
Perry spokeswoman Shaylyn Hynes did not comment on the details of the negotiations but said the Energy Secretary "continues to engage with the leaders of other major oil-producing nations and remains confident in their ability to increase their production if necessary ".
She added that at her last meetings, Perry had "insisted on the importance of keeping supply in stock for the global economy."
Oil prices hit $ 85 a barrel this week as Iranian crude buyers reduced their purchases to meet the terms of US sanctions imposed on Tehran.
Sources said Riyadh would help fill this gap as buyers needed replacement supplies. Saudi Arabia has an unused capacity to produce oil at a higher rate and stores a large volume of crude oil.
At the same time, Saudi Arabia is keen to maintain unity between the OPEC + alliance, a group comprising the OPEC States, Russia and several other producers who have agreed on a limitation of the production. This is because it may be necessary to change course and seek the cooperation of OPEC + for any future reduction in production.
FOOTBALL DIPLOMACY
In the run-up to the private deal with Russia, Falih traveled to the United States during the second week of September, where he attended a football match with a Texas A University alumnus & M in College Station, Texas.
Falih then held official talks with Perry in Washington on September 10, the US Department of Energy announced.
Perry goes to Moscow two days later to meet Novak, while Falih also meets him in Moscow a day later.
During his visit to Moscow, Perry told Reuters that Saudi Arabia, the United States, and Russia had sufficient capacity to offset the loss of Iranian supply over the next 18 months.
After Moscow, Falih and Perry met in Vienna where they attended an event in the Austrian capital, sources said.
"Perry knew that Russia would increase its oil production," said a third source close to the talks.
It was at this point that Falih and Novak discussed the announcement of an increase of 500,000 barrels a day during the meeting of OPEC countries and non-member countries. OPEC members in Algiers on 23 September. The plan did not materialize and no official decision was postponed to an ordinary OPEC meeting in Vienna on December 6th.
"Saudi Arabia is not going to flood the market and risk a stock market crash. Saudi Arabia has to work with other producers and see what they do, which increases exports and to which market, "said another source.
Additional report by Timothy Gardner in Washington; edited by Richard Mably and David Clarke
