Feb 8, 2023
Russia and Saudi Arabia have joined forces to create a new oil strategy poised to shake up the global energy market.
This new partnership between the world’s largest oil producer and one of the biggest oil-producing countries is a major setback for the United States. In addition, the new alliance between Russia and Saudi Arabia results from improved relations between the two countries.
This partnership was further cemented with the recent meeting between OPEC+, Russia, and Saudi Arabia on February 1.
Crown Prince Mohammed bin Salman of Saudi Arabia recently spoke with Russian President Vladimir Putin by phone.
The two leaders talked about ways the OPEC+ group of countries might work together to keep the oil market stable during the phone call.
Days later, the Joint Ministerial Monitoring Committee, which is made up of OPEC+ ministers, met virtually.
And quotes from OPEC+ delegates said the JMMC group is expected to suggest keeping the same oil output guideline.
The Organization of the Petroleum Exporting Countries and its allies set oil production targets last year, which led to a disagreement between the US and Saudi Arabia.
However, the Saudi Foreign Minister recently stated that the stable oil prices in the market demonstrate that the Kingdom made the right decision.
Despite this stability, there are still uncertainties about the supply impact of recent Western sanctions on Russia’s oil industry.
And the reason is its conflict with Ukraine and price caps on Russian products introduced in December.
The Crown Prince and Russian President Putin also discussed the potential for further cooperation in the political, trade, economic, and energy fields.
Now, an OPEC+ panel was expected to recommend keeping the oil production group’s current output policy unchanged.
Five OPEC+ sources stated that the Joint Ministerial Monitoring Committee would discuss the economic outlook and the level of Chinese demand.
However, they are unlikely to suggest any changes to the current policy.
This is due to the rebound in oil prices in 2023 and the uncertainty related to sanctions on Russia and their impact on supply.
Ole Hansen, head of commodity strategy at Saxo Bank, stated that the group wants to wait and see due to the uncertainty. In fact, they want to keep something that’s working well.
Furthermore, the Joint Technical Committee meeting scheduled for January 31 has been canceled. The JTC usually advises the JMMC and the general OPEC+ ministerial meeting on market conditions.
Saudi Arabia and its partners will also continue to produce oil at the levels set last year when they reduced production by 2 million barrels per day to balance the market during a weak economy.
The Russian Deputy Prime Minister stated that the oil market is stable.
However, there are many uncertainties that could affect it, such as inflation, interest rates, and Chinese demand. Now, oil prices have been unstable at the beginning of 2023, with a rise in mid-January followed by a decline towards the end of the month.
This uncertainty has caused the Organization of Petroleum Exporting Countries and its allies to take a cautious approach.
And they did this despite predictions from industry leaders such as Goldman Sachs and Trafigura that prices will increase later this year.
In addition, the OPEC+ Joint Ministerial Monitoring Committee decided to maintain the status quo, causing little change in crude prices at a recent online meeting.
China’s lifting of Covid-19 lockdowns has also led to increased travel within the country. However, the overall economy is still recovering from a recent resurgence in virus cases. OPEC is also monitoring the impact of sanctions on Russia.
These have been predictions of decreased output due to an expanding European Union ban on imports of Russian crude and refined fuels.
And the good thing is oil shipments have remained surprisingly resilient. OPEC leaders have expressed caution in their decisions.
In fact, OPEC’s President, Equatorial Guinea’s Oil Minister Gabriel Mbaga Obiang Lima, stated that the group must be “very careful on any decision.”
Meanwhile, OPEC Secretary-General Haitham Al-Ghais remains “cautiously optimistic” about the global economy, despite weakening growth in some areas due to China’s rebound.
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