Top officials from Russia and Saudi Arabia are set to test their energy policy coordination through a series of meetings this week, both in Argentina on the sidelines of the G20 meeting and in Vienna, Austria next week for a meeting between OPEC and non-OPEC producers.
Crude futures have fallen more than 25 percent since climbing to a four-year peak in early October, amid intensifying oversupply concerns and worries over slowing economic growth. Russia and Saudi Arabia are seeking to balance oil markets and stabilize the falling price of oil, but may have different ideal approaches to achieving those shared objectives.
On Wednesday, Russian President Putin praised Saudi Crown Prince Mohammed and said Moscow is ready to cooperate further on oil prices, according to a report in the website investors.com. He also said crude around $60 a barrel is “balanced and fair” and well above the level needed to keep his government’s budget in surplus.
Saudi Arabia is thought to need oil at more than $80 a barrel to balance its budget.
But Saudi Arabia will have a lot of convincing to do to get Russia and other OPEC members onboard with cuts to boost prices and drain the global supply glut. According to comments by Peter Kiernan, lead energy analyst at the Economist Intelligence Unit to CNBC, Saudi Arabia sees the need to cut output, “but it wants co-operation from other OPEC members and Russia to do so, while also avoiding any conflict with the Trump administration over the direction of oil prices,” he added.
“Saudi Arabia and Russia have been reading from the same book, but they are not exactly on the same page about where they want oil prices to be,” writes analyst Tsvetana Paraskova in Oilprice.com, who noted that Saudi Arabia may “refrain from announcing a decisive sizeable cut next week, opting instead for a ‘quiet cut’ not worded as a production cut at all.”