Saudi Arabia and Russia are at loggerheads again, but OPEC meeting ‘unlikely to ruin the oil party’
Tamas Varga, analyst at PVM Oil Associates, told CNBC via telephone that he believed OPEC and non-OPEC partners had done an “amazing job” in rebalancing the market.
However, while the global oil demand is recovering, he warned that the recovery is still “very, very fragile.”
“What really matters here is Russia and Saudi Arabia. The breakeven price for Russia’s budget is much lower than that of Saudi Arabia, so you will see a kind of gap in the views between these two countries,” Varga said.
OPEC+ initially agreed to cut oil production by a record of 9.7 million barrels per day last year, before easing cuts to 7.7 million and eventually 7.2 million from January. OPEC kingpin Saudi Arabia has since taken on voluntary cuts of 1 million from the beginning of February through March.
Alexander Novak, Russia’s deputy prime minister, appeared to signal Moscow’s intent for a supply increase last month, claiming the market has already balanced.
“Russia wants to move back towards normal production as quickly as possible while Saudi Arabia wants to enjoy high prices a little while longer and rather keep the market on the tight side than the loose side. We think both will get what they want,” Bjarne Schieldrop, chief commodity analyst at SEB, said in a research note.
Russia will likely be allowed to increase output further, he added, while Saudi Arabia will return “some or potentially all” of its 1 million barrels per day unilateral cut.
Analysts expect OPEC+ to discuss allowing as much as 1.3 million barrels per day back into the market on Thursday.
Reference: CNBC
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