According to international reports, Saudi Arabia and Russia agreed in September to increase oil production in order to stabilize prices in the market, and informed the United States just before the last meeting between OPEC countries and other non-OPEC producers. It appears that Saudi Arabia and Russia, through the recent agreement, are making a decision on oil policy before consulting with the rest of the OPEC members.
US President Donald Trump has accused the Organization of Petroleum Exporting Countries (OPEC) of causing high oil prices and called on the Organization to increase production rates in order to reduce prices. Saudi energy ministers Khalid Al-Falih and Russian Alexander Novak have agreed after a series of meetings to increase production from September to December, especially with the record highs in crude prices, which reached $85 a barrel today.
But most market experts say Saudi Arabia and Russia are quietly increasing production and are not acting on Trump’s repeated requests to pump more into the market. Saudi Energy Minister Al-Falih told his US counterpart that the kingdom would go to increase production if buyers asked for more oil.
Both Saudi Arabia and Russia were hoping to announce a total increase of 500,000 bpd at the recent meeting with OPEC and other non-OPEC producers. However, the opposition of some OPEC countries including Iran, which is subject to US sanctions, led to the postponement of any formal decision until the next OPEC meeting in a month. Since the last meeting in Algeria, Saudi Arabia has put plans to raise production by about 200,000 barrels per day to 300,000 barrels per day (bpd) from September to help fill the shortfall in Iran’s production decline due to US sanctions.
Russia has increased its production to 150,000 bpd from September, and the country’s oil output is expected to reach 11.5 to 11.7 million barrels per day by the end of 2018, possibly up to 11.8 million bpd later in 2019. As data showed The Russian Energy Ministry said that Russia’s production amounted to 11.36 million barrels per day in September, up 11.21 million barrels per day in August.
Oil prices rose to $85 a barrel this week, while purchases of Iranian crude oil fell to meet the terms of US sanctions on Tehran. The sources said Riyadh would help fill this shortfall because buyers needed alternative supplies. Saudi Arabia has surplus production capacity to produce oil at higher rates and maintains a significant amount of raw storage. To cover these losses, Saudi Arabia, Russia and other Gulf states are working to increase production, but this could cut global reserve power to its lowest level in 10 years.
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