Saudi Arabia and Russia failed on Monday over whether their producer union should promote crude production amid an escalating pandemic, delegates said after a day of talks ended without an agreement.
The 13-strong Saudi-led Organization of the Petroleum Exporting Countries met virtually on Monday with ten Russia-led producers, a group co-named OPEC-plus, in the first of their monthly meetings to assess global oil demand. Last month, they agreed to increase production by 500,000 barrels per day, bringing their net cut since the start of the pandemic to about 7.2 million barrels per day.
They would decide on Monday to continue to increase production or to keep pat.
Saudi Arabia and most of the broader alliance support it to be stable for at least another month, delegates said. These countries are concerned that a new variant of the Covid-19 virus threatens the revival of the pandemic, while vaccination programs are not progressing as fast as expected.
“Even in this generally optimistic environment, I want to be careful,” Saudi Energy Minister Abdulaziz bin Salman said during the opening speech before the online meetings. “Do not risk what we have achieved for the sake of an immediate illusory advantage.”
However, Moscow has insisted on an increase in production by another 500,000 barrels per day, the delegates said. Russia sees oil consumption returning and is concerned about the loss of market share to US producers, which is not subject to restrictions.
“We hope that in 2021 we will be able to see the recovery in demand, partly due to the vaccination that is already underway in many countries,” Russian Deputy Prime Minister Alexander Novak said before the meeting.
The group will meet again on Tuesday in hopes of erasing the differences. The news of the disagreement caused oil prices to fall lower. In late trading in London, Brent, the international benchmark, fell 0.7% to $ 51.40 a barrel, while West Texas Intermediary fell 1.1% to $ 47.90 a barrel.
Saudi Arabia and Russia clashed over oil policies last year, effectively waging a global price war when everyone opened their sticks and flooded the market. It unfolded just as the coronavirus was spreading rapidly from China to the rest of the world. Governments around the world have begun to close their economies, and demand for oil has tumbled.
Amid a sharp drop in prices, Saudi Arabia and Russia dropped their rivalry, and OPEC-plus agreed to cut 9.7 million barrels a day. Part of the deal requires production to eventually be restored to 2 million barrels a day. The first of the extra productions came online during the summer, while members agreed last month to install another 500,000 barrels a day in January.
Write to Benoit Faucon at [email protected] and Summer Said at [email protected]
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In the print edition of January 5, 2021, “Saudi Arabia, Russia splits oil production.”