NEWSWATCH: “OPEC Pushes Russia to Continue Helping on Oil Prices” – Wall Street Journal/ Benoit Faucon, Summer Said, Nathan Hodge
As King Salman becomes the first Saudi Monarch to visit Moscow, The Wall Street Journal reports on efforts by OPEC to keep Russia in an ad hoc coalition to suppress global oil production.
“Saudi Arabia and OPEC are lobbying Russia to stay on board with their efforts to raise oil prices, amid signals that Moscow wants to end its participation in costly petroleum-production cuts. The efforts culminate … with a meeting between Saudi King Salman and … Putin …. According to people familiar with the matter, the king will ask … Putin to remain for longer than planned in a coalition led by the Organization of the Petroleum Exporting Countries that has withheld almost 2% of global oil supply from the market in 2017.”
Russia reportedly already has sent signals about not continuing the arrangement, raising the prospect of ramping up output, particularly in early 2018, to meet demand.
“Russian Energy Minister Alexander Novak has complained about high output from some OPEC members and has hinted it would be better to scrap the oil output pact when demand increases following the 2018 winter – roughly around the time OPEC’s agreement expires. OAO Rosneft, Russia’s state-controlled oil company, boosted production by 1.2% to 3.82 million barrels a day in September, according to official data. A Rosneft spokesperson said the company ‘fully fulfills its obligations” to reduce production as part of the agreements.'”
At the same time, Russia might need oil prices to be significantly higher than projected to cover Russian government spending.
“According to Fitch Ratings, Russia needs oil prices of $72 a barrel to cover its government spending. A poll of 15 investment banks surveyed by The Wall Street Journal at the end of September predicted that Brent crude, the international benchmark, will average $53 a barrel in 2018, down one dollar from the August survey.”
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[featured image is file photo from a different occasion (U.S. military photo from a visit from King Salman to the United States)]