Oil is torn between the bearish influence of US-instigated trade wars and the bullish threat of supply disruptions from Iran to Venezuela.
(Bloomberg) --Saudi Arabia’s Energy Minister said that he is sure that Organisation of the Petroleum Exporting Countries (OPEC+) will extend production cuts into the second half of the year after holding talks with Russia.
Ministers from the countries voiced similar concerns about the impact of a slowing global economy on oil prices and talked up the benefits of cooperation.
The two leaders of the OPEC+ coalition stopped short of any specific commitments on production volumes after the current output deal expires at the end of this month. Saudi Arabia and Russia were also unable to fix a date for a meeting to discuss the matter with fellow ministers.
Khalid Al-Falih, the Saudi Energy Minister, “There is almost full alignment between the two ministries, we see a consensus emerging that we need to continue the supply management regime that we have established with OPEC+ and in particular with Russia.”
Diverging interests and surging market volatility are making the ministers’ decisions more difficult.
“The biggest drivers are now sanctions as well as tariff wars and they cannot be predicted, the situation in the market is far from being a positive one” and demand growth may slow to below one million barrels a day, so the OPEC+ deal is a very great instrument for dealing with this uncertainty,” added Alexander Novak, the Russian Energy Minister.
While the Saudis clearly want to extend the group’s production curbs beyond their expiry at the end of this month, Russia has so far been at best non-committal.
President Vladimir Putin showed little concern this week about the latest market moves and said his country was better placed to withstand lower prices than its Gulf ally.
“We have certain differences in opinion regarding the fair price compared with Saudi Arabia, $60-65 a barrel suits us just fine because Russia’s budget is based on $40 crude,” said Putin.
Saudi Arabia is able to tolerate lower crude prices than almost anyone else, however letting the market slump again like it did in 2015 -- when Brent traded in the $30 would be unacceptable,” added Al-Falih.