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Page added on June 16, 2018
Russia, Saudi Arabia are getting increasingly chummy, and that has big implications for OPEC and oil prices
Saudi Arabia may have gotten blown out by Russia during its first match at the World Cup, but there seems to be no hard feelings between Crown Prince Mohammed bin Salman and Vladimir Putin.
The two leaders met this past week as the Russian national soccer team clobbered Saudi Arabia 5-0 in Moscow. It appears both have agreed to cement the cornerstone of an already deepening energy and economic relationship, even as they look to alter a successful oil production deal that brought them together.
On Friday, Russia’s energy ministry said it has reached a general consensus with Saudi Arabia that its newfound relationship with the Organization of Petroleum Exporting Countries (OPEC) should be “institutionalized,” and be extended to monitor the market and take action if needed. OPEC will meet this upcoming Friday, and then with Russia and other non-OPEC members after that.
The chumminess of Russia and Saudi Arabia, however, is not unexpected. The relationship between two of world’s largest oil producers is being reinforced as OPEC is poised to grapple with several thorny issues. Chief among them is how to deal with the declines of supply from OPEC member Venezuela, and the effect of renewed sanctions on Iran by the United States.
Iran is being sanctioned by the U.S. after President Donald Trump withdrew from a deal between Iran and six other countries designed to end its nuclear program. Trump said the deal was not tough enough, and under the renewed sanctions, companies around the world in essence will have to stop dealing with Tehran if they want to deal with the world’s largest economy.
“This time more than most, [OPEC’s meeting] is almost more about geopolitics than it is about the market,” said Daniel Yergin, vice chairman of IHS Markit.
“Iranian exports are already down. One of the challenges they face is calibrating the impact of sanctions on Iran, which are already being felt in the market place, although they haven’t actually been imposed yet,” said Yergin. “There’s suddenly a disruption in Libya, and Venezuela keeps sinking.”
The U.S. is definitely the elephant in the room, with pressure also coming from Trump, who has tweeted twice, including this past week, about high oil prices.
“Of course, Trump has brought a new form of jawboning into play, but they’re hearing the same thing form the Indians who are very concerned about what high oil prices mean about growth and the economy, and next year’s election in India,” Yergin said.
Also playing out in the background are domestic political considerations, amid November’s hotly contested Congressional elections. Economic growth is a centerpiece of Republicans’ efforts to maintain an increasingly tenuous grasp of control on the House and Senate.
“This is one time when U.S. mid-term elections are going to figure into what OPEC does,” said Yergin.
“The message from Trump is he is not wanting high oil prices, either as a result of sanctions on Iran or heading into the November congressional election. These elections could be of such decisive importance,” he added.
‘Obfuscate and obscure’
When OPEC ministers meet, theyare expected to consider altering a production deal that has held back 1.8 million barrels a day from the market for the past 18 months.
Russia has pushed for returning a million barrels per day back into the market relatively quickly. However, Saudi Arabia would like to try a lower amount to prevent the price from dropping too much, analysts said.
“I think they do something like return 500,000 barrels a day, but the actual increase will be a lot more. I think they’ll try to obfuscate and obscure as much as they can, to try to prop up the price,” said John Kilduff of Again Capital.
Oil prices took a beating Friday amid concerns about U.S. trade actions, and are off by more than 10 percent from last month’s high. The production cuts have been successful, shrinking world supplies and sending prices high enough to the point where Brent crude popped above $80 in May.
Now that both Russia and Saudi Arabia are looking to return some barrels to the market, not all OPEC members agree. Iran, Venezuela and Iraq have all said the current production agreement should stay in place — mainly because they’re feeling the economic pinch of sanctions.
“You now have in OPEC two countries that have been the subject of international sanctions and for one country, Iran, those sanctions have been supported by two members of OPEC, the [United Arab Emirates] and Saudi,” said Helima Croft, global head of commodities strategy at RBC. “There are a whole host of divisions going into this meeting.”
There are also a complicated series of factors impacting the decision, and it’s not just about stabilizing the market. Already, Venezuela has lost about 700,000 barrels a day this year, and analysts expect U.S. sanctions could remove 500,000 Iranian barrels a day from the market by the end of the year, she said.
Croft said Iran could be a bigger factor in the market later in the year, after the sanctions snap back. “Will they restart their nuclear program? I think the market just thinks, ‘well the Iranians aren’t going to want to get in trouble,'” she said.
But at OPEC, they could ultimately be sidelined by Saudi Arabia, which has the backing of the UAE and Kuwait.
“I think Iran becomes a story post-meeting,” Croft said, suggesting that Iran, Venezuela and Iraq may withhold support for a production boost. “Then you have the Saudis acting independently,” she said.
The OPEC ministers meeting Friday will be followed by a meeting with Russia and other non OPEC producers. Ahead of that, they will be attending an OPEC summit Wednesday and Thursday, which includes global energy ministers as well as the CEOs of international companies like Total and BP, and U.S. producers Pioneer and Hess.
“It’s a weird dynamic. The Russians aren’t liking the U.S. getting up to 11 million barrels a day. They’ve foregone a lot of market share,”
OPEC announced in March that it would invite U.S. producers to the seminar to discuss shale production and technology, as the world’s largest economy continues to churn out massive amounts of crude. The U.S. has been pumping record amounts of oil week after week, with the latest weekly figures showing production of just under 11 million barrels a day.
U.S. output has surpassed Saudi Arabia, and its growing market share is another factor that makes production cuts difficult for OPEC and Russia.
“The Saudis really have a sense of obligation with Trump, after he ditched the Iran nuclear deal,” said Again’s Kilduff.
“It’s a weird dynamic. The Russians aren’t liking the U.S. getting up to 11 million barrels a day. They’ve foregone a lot of market share,” he added. “They could stick it to the U.S. and send prices lower to shake out some of our shale guys. They’ve got something up their sleeve.”
After talks with Saudi Energy Minister Khalid al-Falih in Moscow on Thursday, Russian Energy Minister Alexander Novak said that both nations “in principle” supported a gradual increase in production.
“We in general support this … but specifics we will discuss with the ministers in a week,” Novak said. He noted one possibility would be to gradually raise output by 1.5 million barrels per day, starting July 1.
143 Comments on "Russia, Saudi Arabia are getting increasingly chummy, and that has big implications for OPEC and oil prices"
GregT on Sun, 17th Jun 2018 8:48 pm
“Which part did I make up Davy? All of that info came from you.”
Davy on Sun, 17th Jun 2018 8:50 pm
grehgie, why do you play games? This is a day to be caring about family not attacking family.
GregT on Sun, 17th Jun 2018 8:50 pm
Or has everything that you’ve told everyone here about your ‘family’ also been delusional bullshit?
GregT on Sun, 17th Jun 2018 8:50 pm
Answer the question Davy.
Davy on Sun, 17th Jun 2018 8:52 pm
stop the games
Makati1 on Sun, 17th Jun 2018 8:54 pm
Davy has no family. True? False? No one knows for sure. Not even Davy.
JuanP on Sun, 17th Jun 2018 8:54 pm
Delusional Davy “juan, you both did attacked my family now and you have done it many times in the past. This is what losers do. You both … Blah, blah, blah”
I see this imaginary family attack thing is going to be like the link issue this morning. You should seek professional psychiatric help, Davy. If you don’t do it for yourself, do it for your kids, man! Not doing it for your kids is extremely selfish on your part!
MASTERMIND on Sun, 17th Jun 2018 8:55 pm
Greg
You did attack Davy’s family..You called him a sperm donor and not a father..That is bush league and you should know better..
Davy on Sun, 17th Jun 2018 8:56 pm
3rd world, i bet you felt some remorse today since you deserted your family to be in a turd world country in a slum med with a beach.
Davy on Sun, 17th Jun 2018 8:57 pm
juan, I am glad you are apologizing because maybe you are realizing your bad behavior. That is the first step to wellness.
JuanP on Sun, 17th Jun 2018 8:57 pm
Greg “Or has everything that you’ve told everyone here about your ‘family’ also been delusional bullshit?”
I am beginning to believe that you may be right about this, Greg, but I find the idea sickening! Ivwonder if Davy has ever told the truth about anything? He seems to be a compulsive liar! Would any woman breed with a man like him?
JuanP on Sun, 17th Jun 2018 9:00 pm
Picomind “Greg
You did attack Davy’s family..You called him a sperm donor and not a father..That is bush league and you should know better”
That is an attack on Davy, not his family, moron! I am increasingly convinced that MM is another one of Davy’s sock puppets! Is there no limit to this guy’s insanity?
JuanP on Sun, 17th Jun 2018 9:02 pm
Delusional Davy “juan, I am glad you are apologizing because maybe you are realizing your bad behavior. That is the first step to wellness.”
I already told you that I DID NOT APOLOGIZE! Have you completely lost your mind. The one that needs to apologize here, Davy, is you, not me!
GregT on Sun, 17th Jun 2018 9:05 pm
“You did attack Davy’s family..You called him a sperm donor and not a father.”
I am sure that Davy’s family, If it does exist, has had enough of his delusional bullshit as the rest of us.
GregT on Sun, 17th Jun 2018 9:08 pm
“stop the games”
No games Davy, reality check.
Answer the question.
Which part did I make up?
Makati1 on Sun, 17th Jun 2018 9:10 pm
The board;s personification of “loser” is the Ozark delusionalist, Davy. He makes MM seem almost normal. Well, kinda. lol
JuanP on Sun, 17th Jun 2018 9:13 pm
Delusional Davy “3rd world, i bet you felt some remorse today since you deserted your family to be in a turd world country in a slum med with a beach.”
That is a low blow even by your non existing standards, Davy! Mak loves his family, unlike you, who simply uses them to feed your narcissism, and must be missing them on Father’s Day. That is hitting below the belt! You are a disgusting, repulsive lowlife, exceptionalist! If you had any decency you would apologize for that, so I don’t expect you to because I know that you are a thoroughly indecent human being.
Makati1 on Sun, 17th Jun 2018 9:15 pm
“3rd world, i bet you felt some remorse today since you deserted your family to be in a turd world country in a slum med with a beach.”
My kids contacted me to wish me a Happy Father’s Day this morning, Sunday evening their time. I also got a similar wish from another person I helped along the way who also considers me as “family”. I guess I am not what you want me to be. lol
MASTERMIND on Sun, 17th Jun 2018 10:02 pm
Ex-CIA head compares US immigration policy to Nazi Germany
https://nypost.com/2018/06/17/ex-cia-head-compares-us-immigration-policy-to-nazi-germany/
Twittler!
MASTERMIND on Sun, 17th Jun 2018 10:04 pm
Disgusting that we’ve fallen so far that comparison to Nazi Germany is even somewhat reasonable.
MASTERMIND on Sun, 17th Jun 2018 10:18 pm
Can Mexico just bomb the White House already. #fucktrumph release the children to their parents. You fat piece of shit!
GregT on Sun, 17th Jun 2018 10:21 pm
There is no comparison to ‘Nazi’ Germany MM.
The Germans before WW2 were rising up from the Great Depression, and the Treaty of Versailles, that were both imposed upon them by the Zionists. America today, for the most part, is still clueless, and is allowing the country to be destroyed from within.
MASTERMIND on Sun, 17th Jun 2018 10:31 pm
Greg
Sorry, that is a little to tin foily for me..And you had your chance to get your theories fact checked, and you refused..
JuanP on Sun, 17th Jun 2018 10:32 pm
That was an interesting link, MM. I have the same experience; I live surrounded by rich neoliberal Hillary voters, but I garden and farm with working class Trump voters. When I tell this to the Trump voters they say “Yes, I know”; when I tell this to Hillary voters they start foaming at the mouth and lose it. As ridiculous as it sounds hillary voters are more intransigent than Trump voters, in my experience. No wonder they were so surprised when they lost the election; they have no clue how the other half lives and thinks. It is sad to watch. Thanks again for that link! And the New York Post, too! LOL!
Cloggie on Sun, 17th Jun 2018 10:36 pm
millimind opines: “He is already scared of everything”
How can you say that?! You have no idea how upbeat I am about the developing situation!
– Trump calling Orban to congratulate him with his border fence
– Trump (and Italy) pleading for Russia to return to the G8
– Watched docu on Jerry telly yesterday about Putin-Russia. Despite the usual western obligatory tone of (light) skepticism, the moderator could not surpress his amazement with the new Russia, the country is totally reborn. In contrast to the USSR, everything in Russia functions. Sanctions only led to more autarky. They are self-sufficient in food supply. There is a strong personality-cult around Putin.
– Yesterday BobInget made a back-of-an-envelope calculation about the true state of US finances. Now here is a collapse one can believe in, not these 15 year old moldy peak oil links, village idiot millimind always spams this board with, falsely suggesting a geophysical supply limit soon.
– Merkel government is with the back against the wall and could fall any minute from now.
Afraid, me? It is going to be a rough ride and I am enjoying every minute of it! The multicult West is fortunately going down the drain, I hope and expect for a European and rump-American rebirth “after the break”, at a much lower material level, for sure, but materialism was never a motive for me. Everything is going in the direction I have been forecasting tor years here.
Cloggie on Sun, 17th Jun 2018 10:50 pm
Showdown in Germany today. The expectation is that the CSU will back Seehofer, give the finger to Merkel and effectively will begin to prepare for an independent migration policy (as in zero) in southern state Bavaria. Officially they will give Merkel two weeks time to realize her prefered “European solution”, but nobody expects that to happen as Eastern Europe, unisono, refuses to take in even a single gate crasher/welfare tourist. Merkel is finished. The future is to the populists.
MASTERMIND on Sun, 17th Jun 2018 10:51 pm
Clogg
15 year old peak oil links? Here is one from a few months ago..
Sleepwalking Into The Next Oil Crisis
https://www.forbes.com/sites/rrapier/2018/03/23/is-the-world-sleepwalking-into-an-oil-crisis/#509edc8b44cf
Cloggie on Sun, 17th Jun 2018 10:56 pm
Ex-CIA head compares US immigration policy to Nazi Germany
https://nypost.com/2018/06/17/ex-cia-head-compares-us-immigration-policy-to-nazi-germany/
Twittler!
One can only hopy they soon have the same emigration policies as well, especially for warmongers like you, millimind.
Cloggie on Sun, 17th Jun 2018 11:15 pm
Government ‘could collapse’ over Brexit deal
https://www.bbc.com/news/uk-politics-44511969
My biggest geopolitical fear in life is indeed that somebody will sabotage Brexit in the last minute. We need to get rid of America’s watchdog and swap them for Russia and its nuclear arsenal and resources, of which Britain has none. Only political correct opinions. Britain is not European, but Anglo-Zionist, let them go. In return for Gibraltar we can even let them of the hook for free, as long as they take a hike and we can seal them off for good. The focal point of interest for the 640 million of PBM will be Heartland USA. Perhaps we can tear off 120 million or so whitey’s after BobInget’s financial collapse materializes, provided they pull-off an insurrection. Richard is willing:
https://youtu.be/1tYQ-YV3J-I
If not, enjoy your USSR-2.0, happy mongrelizing under the inspiring leadership of the millimind’s of this world, who will daily remind whitey of his “white privilege” and that he can’t dance and needs to breed himself out of existence.
MASTERMIND on Sun, 17th Jun 2018 11:17 pm
Once they set one precedent that people get used to they will move on to the next. Next they will start taking away children from natural citizens..
And first they came for..
MASTERMIND on Sun, 17th Jun 2018 11:25 pm
Clogg
Do you really think your movement of neckbeard flunkies can defeat the worlds most powerful people? They know the UK is going down the toilet because the north sea is running out..They likely rigged the brexit vote so they can blame the collapse on your movement..Same with Itlay..
You are being set up and played..
LMFAO!
MASTERMIND on Sun, 17th Jun 2018 11:45 pm
‘Peak Oil’ and the German Government
Military Study Warns of a Potentially Drastic Oil Crisis
The team of authors, led by Lieutenant Colonel Thomas Will, uses sometimes-dramatic language to depict the consequences of an irreversible depletion of raw materials. It warns of shifts in the global balance of power, of the formation of new relationships based on interdependency, of a decline in importance of the western industrial nations, of the “total collapse of the markets” and of serious political and economic crises.
The study, whose authenticity was confirmed to SPIEGEL ONLINE by sources in government circles, was not meant for publication.
http://www.spiegel.de/international/germany/peak-oil-and-the-german-government-military-study-warns-of-a-potentially-drastic-oil-crisis-a-715138.html
http://www.energybulletin.net/sites/default/files/Peak%20Oil_Study%20EN.pdf
JuanP on Sun, 17th Jun 2018 11:47 pm
I made a mistake above when I posted this ”
That was an interesting link, MM. I have the same experience; I live surrounded by rich neoliberal Hillary voters, but I garden and farm with working class Trump voters. When I tell this to the Trump voters they say “Yes, I know”; when I tell this to Hillary voters they start foaming at the mouth and lose it. As ridiculous as it sounds hillary voters are more intransigent than Trump voters, in my experience. No wonder they were so surprised when they lost the election; they have no clue how the other half lives and thinks. It is sad to watch. Thanks again for that link! And the New York Post, too! LOL! ” I must have clicked on a link the page MM linked to which led me to this article:
https://nypost.com/2018/06/16/these-harvard-kids-got-the-lesson-of-their-life-in-the-heartland/
It was this article I was referring to in my comment, not the one MM linked to. i am a moron! LOL!
Makati1 on Sun, 17th Jun 2018 11:58 pm
JuanP, the inability to go back and correct simple mistakes, when we hit “post”, is a negative for this site. However, we don’t make many, unlike some here.
JuanP on Mon, 18th Jun 2018 12:04 am
Mak, One of my worst flaws is that I am too much of a perfectionist so if I could I would go back and correct every mistake, including the most insignificant typos. It is what it is, and I am happy PO exists.
Makati1 on Mon, 18th Jun 2018 12:17 am
I’m glad also. There is much useful info in the articles posted on PO and the comments paint a good picture of the thoughts and views of those who see behind the curtain and can relate to the real world. Views from many observers paint a more clear picture of that reality than just a narrow viewpoint from one source.
GregT on Mon, 18th Jun 2018 1:07 am
“Sorry, that is a little to tin foily for me.”
No need to apologize MM. Tinfoil can be uncomfortable.
Cloggie on Mon, 18th Jun 2018 1:15 am
‘Peak Oil’ and the German Government
That’s millimind and his 2010 German army link again. These German idiots never repeated their “findings” ever since. This is 2018 now, so we should face immanent peak oil collapse, instead they are going to build Nord Stream 2 and fuel prices are below 2008.lol
Show me a recent German army link, millimind, where they repeated their 2010 claims. I did look for it extensively, it doesn’t exist. Complete failure, just like you.
Germans have no understanding of oil or fracking, because they never had any.
Do you really think your movement of neckbeard flunkies can defeat the worlds most powerful people?
Yes, with two fingers in the nose. The “world’s (((most powerful people)))” already lost the presidency to an Aryan, soon they will lose the entire country… because everybody on this planet wants to see the US empire go, even many within the US itself.
They know the UK is going down the toilet because the north sea is running out..They likely rigged the brexit vote so they can blame the collapse on your movement..Same with Itlay..
Britain, Europe, Denmark, Holland are erecting one offshore wind farm after the other. In 12 years time we’ll have 32% primary energy renewable, which is more than enough to survive.
http://www.europarl.europa.eu/news/en/press-room/20180614IPR05810/energy-new-target-of-32-from-renewables-by-2030-agreed-by-meps-and-ministers
I expect that the transition speed will increase before 2030, if new data comes in that shows warnings regarding fossil fuel supply. Many in Europe want to see the transition done entirely before 2030, which can be done, but is costly. More frugal economists like to see fossil fuel power stations written off first, which makes economic sense. And if everything goes wrong (total western financial collapse, ME in flames, Russia not able to sufficiently supply), we in Europe can still fall back on the trillions of tons of coal stored under the North Sea that can be exploited with (very dirty) underground coal gasification (UCG).
There is no energy problem for Europe, none whatsoever.
https://deepresource.wordpress.com/2017/01/01/underground-coal-gasification/
Cloggie on Mon, 18th Jun 2018 1:17 am
“Europe” should read “Germany”
Davy on Mon, 18th Jun 2018 4:23 am
“because everybody on this planet wants to see the US empire go, even many within the US itself.”
Sorry but it is not that easy as if the world is binary. You conspiracist “empire” people found your imaginary monster to blame most every problem on and in addition deny you every problem. The world isn’t in agreement. Besides most of the world is too concern about making money to care. It is just extremism that talks like this. I think much of the world want to see extremism go this includes many here and includes the worst of what is in DC.
Davy on Mon, 18th Jun 2018 4:33 am
“Britain, Europe, Denmark, Holland are erecting one offshore wind farm after the other. In 12 years time we’ll have 32% primary energy renewable, which is more than enough to survive.”
You might have 32% primary energy renewable and you might not. That is not enough to systematically hold society together as we know it currently especially if the rest of the world can’t be up to an acceptable level if we have serious decline issues. It is absolutely clear more energy is needed not less to take care of the many problems facing or civilization. 32% primary energy is not enough to take care of a severe peak oil dynamic situation. It is likely our civilization will not be able to power past 32% mainly because of the nonlinear increasing cost of every percentage of increased penetration. Many other financial and physical factors start converging. This 32% figure is a good figure to shoot for and it means we may have 10-20 years more of life as we know it but this is not the solution our cornucopians crow about. The catch 22 of all this is 10-20 years of more of life as we know it means the planetary web of life as we know it may not be possible.
JuanP on Mon, 18th Jun 2018 5:42 am
Cloggie “because everybody on this planet wants to see the US empire go, even many within the US itself.”
Absolutely!
MASTERMIND on Mon, 18th Jun 2018 7:13 am
CLoog
Fracking in one country can’t make up for all of the worlds declining conventional legacy fields..And why would they make another study when that one is perfectly fine..
Chevron CEO warns US shale oil alone cannot meet the world’s growing demand for crude
https://www.cnbc.com/2017/05/01/us-shale-cannot-meet-the-worlds-growing-oil-demand-chevron-ceo-warns.html
Sleepwalking Into The Next Oil Crisis
https://www.forbes.com/sites/rrapier/2018/03/23/is-the-world-sleepwalking-into-an-oil-crisis/#509edc8b44cf