Saudis Still Skeptical of OPEC Coalition Cuts
Saudi Arabia on Friday said it remained skeptical of an agreement to cut oil output as nonmember Russia emerged as the ultimate deal breaker.
OPEC deliberated for a second day to end a deadlock that is threatening to crash oil prices. The Saudis—the de facto leaders of OPEC—are trying to convince the Russians to join a significant production cut that would mop up a burgeoning global oil supply glut.
Arriving at the meeting, Saudi Arabia’s Energy Minister Khalid al-Falih said he wasn’t confident a deal would be reached.
Speaking as he arrived to join the OPEC meeting as a nonmember, Russian energy minister Alexander Novak refused to comment on whether he was confident about a deal.
Talks hit a snag this week when Saudi Arabia and Russia disagreed about sharing the pain of curbs to stop a 30% drop in oil prices.
The sway held by Russia over the cartel’s decisions suggests Saudi Arabia is losing its grip on the group, delegates say. Although Russia isn’t an OPEC member, the Saudis have insisted on Moscow’s joining recent meetings.
Saudi Arabia and Russia have disagreed about sharing the pain. Earlier this week, the two countries clashed when Russia proposed to cut as little as 100,000 barrels a day, according to people familiar with the matter.
That would mean Saudi Arabia would need to reduce its output five times more than Russia, despite both pumping an average of over 10 millions barrel a day. Saudi energy minister Khalid al-Falih told his Russian counterpart, Alexander Novak, to inform President Vladimir Putin that the offer was unacceptable, one person said.
Then on Thursday, Saudi Arabia squared up against Iran, Libya, Nigeria and Venezuela after they called for exemptions from the cuts, according to delegates.
But Saudi Arabia also wants to be cautious in its action over fears it could upset ally U.S. President Donald Trump.
The White House has said it would stand by the kingdom despite the killing of a dissident journalist by Saudi operatives, but is pressing Riyadh not to push oil prices upward. The Saudis “are considering a silent cut,” one delegate said, referring to a reduction that would not be announced.
But a Saudi official said the lack of detailed agreement so far signaled how the kingdom was losing its grip on OPEC’s decision making.
“This is probably the first time in OPEC’s history that Saudis are losing leverage,” he said. “They have no leverage on Russia, no leverage on the states and no leverage on anyone.”
Brent crude was recently down 0.2% at $59.92 in London trading.
Christopher Alessi & Benoit Faucon & Summer Said