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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"
Cloggie on Sat, 16th Jun 2018 11:17 am
Meanwhile in syria…
https://www.zerohedge.com/news/2018-06-16/syria-sends-more-troops-south-despite-new-us-warnings
“Syria Sends More Troops To South Despite New US Warnings”
How dare the Syrians even think of occupying there own country!
“The United States once again warned this week it would “take firm and appropriate measures” against the Syrian government forces should they continue pushing into the southwest of the country, which has long been held by Al-Qaeda, ISIS, and other groups fighting the Assad government.”
ISIS=USA
Q.E.D.
Dredd on Sat, 16th Jun 2018 2:10 pm
Oil-Qaeda is sniffing fumes and whistling past the grave yard.
JuanP on Sat, 16th Jun 2018 4:33 pm
On subject:
https://www.cnbc.com/2018/06/15/opec-is-about-to-shake-up-the-oil-market.html
Makati1 on Sat, 16th Jun 2018 6:00 pm
Low oil prices will definitely shake out the shale guys and some of the big boys. Debt is all that is holding the Us oil production up. And, with the Fed raising interest rates, lower oil prices would be the last nail in their coffin. The last half of this year is going to be interesting for many reasons.
JuanP on Sat, 16th Jun 2018 9:07 pm
On subject: Russia and Saudi Arabia have apparently agreed that OPEC+ will increase production by 1.5 mbpd in the third quarter and allow members to choose how much to procuce on their own.
https://sputniknews.com/business/201806171065481750-moscow-riyadh-agree-opec-deal-extension/
GregT on Sat, 16th Jun 2018 9:25 pm
“On subject: Russia and Saudi Arabia have apparently agreed that OPEC+ will increase production by 1.5 mbpd in the third quarter and allow members to choose how much to procuce on their own.”
Good news for consumers, not so good news for NA producers, or the environment.
Makati1 on Sat, 16th Jun 2018 9:30 pm
Perhaps, if the oil price drops to <$40 again and stay there, the oil industry in the Us will collapse, triggering a depression and the decline of energy use world wide? We can only hope. But, I think it is too late to save the climate.
twocats on Sat, 16th Jun 2018 9:42 pm
good find juanp. I imagine they are looking at the same permian pipeline capacity bottlenecks that many other analysts are seeing. if OPEC+ didn’t send these signals (and follow through?) then we could have seen a spike in oil price for Brent beyond $90 by end of summer.
OPEC production charts are about to get interesting. anyone that has been using the production cuts to mask PO is about to get outed. Qatar? Kuwait? Algeria?
We’ve been conditioned by so much shale oil (for lack of a better word) accomplishment that even most of the PO faithful believe can’t possibly conceive of a PO induced collapse before 2020 – 2025. The capitulation is stark. Even in myself. But I don’t see it as a given.
One theory is that the global economy is about to unravel, so OPEC+ would like to build some extra cash reserves leading up to this global economic downturn.
MASTERMIND on Sat, 16th Jun 2018 11:07 pm
Areas Of The World More Vulnerable To Collapse
Lastly, the end game suggests that the majority of countries will experience an economic collapse due to the upcoming rapid decline in global oil production.
https://srsroccoreport.com/areas-of-the-world-more-vulnerable-to-collapse/
Sounds just like what ole MM has been saying for over a year!
Thomas on Sat, 16th Jun 2018 11:46 pm
OPEC is becoming more about geopolitics and money, than striving for a balanced barrel price that is sustainable. As members rarely agree, and non-members have a greater influence on the key OPEC players, the organisation seems to be coming more irrelevant with every meeting. A new, more accdeptable organisation, of all oil proucers is needed. To make this new platform more PR acceptable and give it some teeth and respect, all members must sign into an agreement that a small percentage of their oil income will be donated to research into alternative, non fossil fuel types of energy. In the long run, it will be to their own and the world’s benefit.
dissident on Sun, 17th Jun 2018 12:08 am
There is no “shale oil” accomplishment. If the global production curve exhibited annual increases of the good old days, then such a claim could be made. An irregular plateau with full bore production from every accessible source, including the “shale” plays, is confirmation of PO. Future production is being delivered today. When, it comes, the crash will be spectacular. There will not be any bell curve all-time production distribution.
joe on Sun, 17th Jun 2018 12:24 am
‘collapse’ is here. You can’t run an economy for more than a decade on zero percent interest rates. Tight oil is only possible when you can throw rivers of free money at it, like now.
Makati1 on Sun, 17th Jun 2018 1:20 am
You are correct Joe. We are in the process, not waiting for the collapse.
deadly on Sun, 17th Jun 2018 7:07 am
Why should oil ready for marketing not be sold?
You are manipulating the market.
If Putin wants to sell more Ruskie oil and make some money, what is wrong with that?
If Iran wants to sell heavy oil to India and India wants to buy it, who cares?
Of course, there is always somebody out there willing to buy oil, so some from Russia can be sold.
Sell more oil, the price will drop.
Translation: The Saudis and Russians don’t care about climate change, they don’t care about AGW, they don’t care if Peak Oil is real, they want some money.
That is the story, the reality.
Greenland and the Arctic
Greenland ice cores have generated a huge amount of climatic data. Ancient temperatures, measured using oxygen isotopes in the ice, can be accurately dated from annual dust layers in the ice dating back 100,000 years. The δ18O data clearly show remarkable swings in climate. In the past 500 years, Greenland temperatures have fluctuated back and forth between warming and cooling about 40 times, with changes every 25–30 years. Among the more prominent climate changes recorded in the ice cores are 8500 years of Holocene temperatures that were 2–5°F warmer than present; a 8200-year cold period in the early Holocene; the Minoan Warm Period (∼3300 years ago); the Roman Warm Period (250 BC to 400 AD); the Dark Ages Cold Period (∼400–900 AD); the Medieval Warm Period (900–1300 AD); the Little Ice Age (1300 AD to the 20th century); the Wolf Minimum Cold Period (∼1280–1350 AD); the Spörer Cold Period (1460–1550 AD); the Maunder Minimum Cold Period (1645–1710); the Dalton Cold Period (1790–1820); the 1880–1915 Cold Period; the 1915–1945 Warm Period; the 1945–1977 Cold Period; and the 1978–2000 Warm Period. Comparisons of the intensity and magnitude of past warming and cooling climate changes show that the global warming experienced during the past century pales into insignificance when compared to the magnitude of profound climate reversals over the past 25,000 years. At least three warming events were 20–24 times the magnitude of warming over the past century, and four were 6–9 times the magnitude of warming over the past century. The magnitude of the only modern warming that might possibly have been caused by CO2 (1978–2000) is insignificant compared to the earlier periods of warming.
Arctic temperatures have fluctuated repeatedly in step with Greenland and global climate changes. Historic records at many weather stations in the Arctic show that temperatures were higher in the 1930s and 1940s than during recent warming (1980–2000). Sea ice extent has expanded and contracted with temperature fluctuations and has sharply increased over the past several years.
JuanP on Sun, 17th Jun 2018 7:27 am
On suject:
https://www.rt.com/business/429968-russia-saudi-oil-deal/
Davy on Sun, 17th Jun 2018 7:39 am
Juan, quit the empty linking. Give the title and some of the content or you are just pasting shit. More of your lack of content mind dumping.
JuanP on Sun, 17th Jun 2018 7:55 am
On America’s “moral authority”:
https://caitlinjohnstone.com/2018/06/17/mattis-putin-is-trying-to-undermine-americas-moral-authority/
JuanP on Sun, 17th Jun 2018 8:02 am
Davy “Juan, quit the empty linking. Give the title and some of the content or you are just pasting shit. More of your lack of conten”
Davy, quit the infantile whining! The article’s subject is clear on the link, retard! LOL! You can read, right? Besides, when will you get it through your head that we don’t have to do what you want. YOU HAVE NO POWER OVER NOBODY! You lack morality! We can do whatever we want whenever we want to and there is absolutely nothing you can do about it! Grow up, loser! One would expect someone who claims to be a father to have something better to do today than moan and whine like a little kid. Why don’t you behave like a decent human being for one day in honor of your children?
twocats on Sun, 17th Jun 2018 8:17 am
both articles are on point and have gotten us back on track of the topic. because honestly this is complicated with some moving pieces.
Saudi Arabia: the reimposed sanctions on iran (and venezuela – no one ever mentions) although they seem crazy here in the States is most likely what SA wants. But it doesn’t help if global economy slumps. Plus allows SA to make more money by taking market share from Iran.
Russia – although an ally of Iran – has been calling for a de-escalation by Iran in Syria and Iran has refused. Russia has potentially found a new “friend” in SA. Iran has few options for other sponsors (China?), so Russia doesn’t have to appease Iran. By going along with SA they’ve shown they are pragmatic and flexible. They regain leverage over Iran while simultaneously giving a win to SA.
When Mattis says “moral authority” that is just empire-speak for control. i don’t consider putin a “mastermind” of anything – but this does appear to be the right move for SA and Russia for their mutual interests.
JuanP on Sun, 17th Jun 2018 8:32 am
Twocats, I think the Russians are mostly concerned with their own needs. Putin is not going to hurt Russia to support Iran. Russia needs an oil price that allows its oil companies to make a profit and the government to balance its budget. Like you said in your comment yesterday, if they didn’t do this we would have an oil price spike and that is not in Russia’s best interest because it would have negative consequences for the global economy. I think Russia’s goal right now is to keep prices more or less where they are and for that they need to increase production. If they have to piss off Iran, Iraq, and Venezuela in the process, so be it!
Davy on Sun, 17th Jun 2018 9:00 am
good boy explain yourself but please post proper links, dumbass playboy.
JuanP on Sun, 17th Jun 2018 9:09 am
Delusional Davy “good boy explain yourself but please post proper links, dumbass playboy.”
Another insulting comment by the board’s bully who has nothing better to do on Father’s Day! You are the only person here, Exceptionalist, who has problems with my links. Maybe you are the one with problems, not the links? Just saying! Keep proving what a fucking retard you are; that is one thing you are very good at! LOL! Why don’t you at least pretend to spend some time with your kids. Have they even called you yet? I know your daughter probably won’t because she knows you are scum!
Davy on Sun, 17th Jun 2018 9:14 am
Playboy, having a clean board is my motivation. I could give a shit about a brat like you. If you are going to be here more then do things right please, grassyass.
dissident on Sun, 17th Jun 2018 9:17 am
Davy-tard, the self-appointed thread police. Just ignore this smelly turd. It can’t stop you from posting and nobody with a brain will take it seriously.
twocats on Sun, 17th Jun 2018 9:18 am
well said juanp – i think we are in agreement there.
davy whats up with the proper link thing? i figured it out – opened it in a new window – read it and appreciated it. if it continues the conversation then its good. if its trying to start a new conversation and people bite – good as well. If its a weird totally out of left field link that no one pays any attention to – then that’s what the mouse roller is for.
Davy on Sun, 17th Jun 2018 9:42 am
Lol, the ugly Canadian anti-American Russophile speaks. Who care what you think dissssdent. There is not an objective bone in your body. You are a retarded Canadian that thinks Russia is the center of the world. Start saying something useful instead of pricking.
Davy on Sun, 17th Jun 2018 9:46 am
That’s fine two cats and that is your opinion but we have people here that are sloppy with links. It would be nice for these people to show what they know by referencing content. I don’t think that is too much to ask. We have intellectually lazy and dishonest people here that need to be called out. So what is the problem with that?
MASTERMIND on Sun, 17th Jun 2018 10:24 am
God this site is infested with trolls! This subject really brings them out of the woodwork..
MASTERMIND on Sun, 17th Jun 2018 10:32 am
Trump has conditioned his followers to ignore facts..
MASTERMIND on Sun, 17th Jun 2018 10:53 am
Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world
W. B. Yeats
The Second Coming
GregT on Sun, 17th Jun 2018 11:17 am
“Juan, quit the empty linking. Give the title and some of the content or you are just pasting shit. More of your lack of content mind dumping.
You do not have any say, or control, over what anybody else on this board thinks, believes, says, or posts Davy.
Give it a rest already.
Davy on Sun, 17th Jun 2018 11:50 am
“You do not have any say, or control, over what anybody else on this board thinks.”
Spare me the lame pricking, grehggie. If you want to show intellectual maturity give links with title and content. The content shows you are able to comprehend the substance of the reference. Do it if you want if you don’t fine. It is that simple grehggie. In your case you rarely say anything. All you do is play grab ass with the groupies or stalk and prick Americans you don’t like. That activity is neither intellectual or mature.
JuanP on Sun, 17th Jun 2018 11:55 am
Delusional Davy “Playboy, having a clean board is my motivation. I could give a shit about a brat like you. If you are going to be here more then do things right please, grassyass.”
More delusions and abuse from the board’s most filthy member! LOL!
JuanP on Sun, 17th Jun 2018 11:58 am
Delusional Davy “Lol, the ugly Canadian anti-American Russophile speaks. Who care what you think dissssdent. There is not an objective bone in your body. You are a retarded Canadian that thinks Russia is the center of the world. Start saying something useful instead of pricking.”
I went for a swim and a run on the beach and I come bak here to see that the board’s bully is still at it like he’s been for years. Get a life, Davy!
JuanP on Sun, 17th Jun 2018 11:59 am
Delusional Davy “Playboy, having a clean board is my motivation.”
And how is that working out for you, retard?
JuanP on Sun, 17th Jun 2018 12:04 pm
Delusional Davy “We have intellectually lazy and dishonest people here that need to be called out. So what is the problem with that?”
Are you talking about yourself? LOL! I see you are making friends left and right! Keep lying and abusing others, please, only you can prove what a complete lunatic you are, and you do with every commeny. LOL!
JuanP on Sun, 17th Jun 2018 12:06 pm
Nanomind “God this site is infested with trolls! This subject really brings them out of the woodwork..”
You are one of the biggest trolls here, Disfunctional Synapsis! LOL!
JuanP on Sun, 17th Jun 2018 12:09 pm
Greg “You do not have any say, or control, over what anybody else on this board thinks, believes, says, or posts Davy.”
Davy would need to not be a completely delusional insane moron to be capable of doing that!
GregT on Sun, 17th Jun 2018 12:10 pm
“Do it if you want if you don’t fine. It is that simple grehggie.”
Correct. Why are you having so much difficulty getting that through your thick skull?
JuanP on Sun, 17th Jun 2018 12:11 pm
OopsI That was about your Davy giving it a rest comment, Greg.
JuanP on Sun, 17th Jun 2018 12:15 pm
Delusional Davy “Spare me the lame pricking, grehggie. If you want to show intellectual maturity give links with title and content. The content shows you are able to comprehend the substance of the reference. Do it if you want if you don’t fine. It is that simple grehggie. In your case you rarely say anything. All you do is play grab ass with the groupies or stalk and prick Americans you don’t like. That activity is neither intellectual or mature.”
If you were less insane and you could see how ridiculous it is for you to ask others to show “intellectual maturity” you would be laughing as hard as I am. ROFLMFAO! Five minute break to catch my breath and drink something before I end up with a sore throat again.
MASTERMIND on Sun, 17th Jun 2018 12:21 pm
Happy Fathers day Greg..
Davy on Sun, 17th Jun 2018 12:21 pm
grehgie, why is it so hard for you to do things better with a little more effort? Why not show excellence instead of mediocrity? All it takes is showing you know what you are talking about. Empty links are like people who use big words but don’t know what they mean.
Davy on Sun, 17th Jun 2018 12:24 pm
Juan, you are acting manic. You might want to self-reflect a little on your behavior. Just so you know I am not going to read multiple comments that are just emotional stalking and pricking. Offer up some comments with ideas and we can debate that. Why should I debate the fact you don’t like me. That is obvious dummy.
MASTERMIND on Sun, 17th Jun 2018 12:24 pm
Happy Fathers day to you too Davy..
Keep up quality trash talk..
Davy on Sun, 17th Jun 2018 12:25 pm
thanks mm, I guess, lol
MASTERMIND on Sun, 17th Jun 2018 12:41 pm
Fox News can’t spell “Immigration” ..
https://imgur.com/a/okartoo
JuanP on Sun, 17th Jun 2018 12:46 pm
Delusional Davy “Juan, you are acting manic. You might want to self-reflect a little on your behavior. Just so you know I am not going to read multiple comments that are just emotional stalking and pricking. Offer up some comments with ideas and we can debate that. Why should I debate the fact you don’t like me. That is obvious dummy.”
I guess you simply don’t understand what I am doing, exceptionalist! I don’t care whether you read the comments or not, moron. God, you are stupid! And I know that you read all the comments even if you deny it because you are so insane you couldn’t stop yourself even if you wanted, and I am not sure that you want because masochism seems to be one of your many mental problems.
JuanP on Sun, 17th Jun 2018 12:49 pm
Delusional Davy “You might want to self-reflect a little on your behavior.”
ROFLMFAO again! That is rich coming from you, exceptionalist! God, you are so fucking fucked up it is really hard to believe that you are not committed. Only in the completely fucked up USA would they let a deranged lunatic like you loose! LOL!
JuanP on Sun, 17th Jun 2018 12:52 pm
Delusional Davy “Offer up some comments with ideas and we can debate that. ”
Why on Earth would I want to debate anything with an insane bully like you? I guess you really don’t understand what a low opinion we have of you even if we have explained it to you in a wide variety of ways. God, you are thick?