Saudi Arabia threatens to open the valve: what made disobedience dangerous in OPEC +?: EADaily

The price of oil rose to almost $75 per barrel due to Iran’s missile attack on Israel. But it may return to the previous position around $ 71. Because of such a low price, OPEC + countries postponed the increase in production for two months. At the same time, Saudi Arabia threatened its partners to drop oil prices by opening the valve if they do not comply with quotas. Some countries are not fulfilling their obligations, which will also affect the prices of global raw materials. For Russia, such a move with Riyadh is not going well, experts believe.

If OPEC + countries do not meet their oil production obligations, the price of oil could fall to $50 per barrel. According to The Wall Street Journal, such a warning was given to participants by the Minister of Energy of Saudi Arabia, the Prince Abdel Aziz bin Salman.

The spokesperson of the publication said that the participants of the telephone conference accepted the words of the prince as a threat to start a price war by increasing the supply of Saudi Arabia’s oil significantly.

Separately, Abdulaziz bin Salman focused on Iraq and Kazakhstan, which are not meeting their quotas and are not compensating for overproduction, a source told The Wall Street Journal.

In September, oil prices fell to around $71 per barrel, the lowest level since November 2021. On the one hand, the market does not expect a significant increase in demand from the largest consumers in the US and China. On the other hand, even the decision of OPEC + to postpone the start of the production increase until December did not have a special role, since the members of the agreement themselves break the quotas and bring more oil to the market.

The International Energy Agency believed that excess quantities, for example, in May amounted to 630 thousand barrels per day – 16% of the reductions announced. The UAE was named the biggest violator. Their production was 3.25 million barrels per day – 340 thousand barrels more. Iraq came next – 280 thousand barrels more. Also, the quotas were not fully respected in Saudi Arabia and Russia. According to the IEA, with 50 thousand barrels per day and 170 thousand barrels per day, respectively. All partners promised to compensate for overproduction, but not all do.

Chief analyst at FNEB and expert at the Financial University under the Russian Government Igor Yushkov note that there are control problems in OPEC +, and Saudi Arabia is always struggling with them. The expert gave the example of Russia, where the government cannot influence companies and everything follows the path of a gentleman’s agreement.

“If OPEC+ collapses, everyone will peak and there will be oversupply. As a result, all countries will suffer, because at this time the price of oil can fall below $50 per barrel,” – noted Igor Yushkov.

Rystad Energy believes that onshore fields in the Middle East are the most attractive in terms of cost. The average price for new projects is $27 per barrel. Offshore fields were valued at $37 per barrel, deep sea fields at $43, and North American shale at $45.

The main analyst of FNEB notes that the implementation of the threat by Saudi Arabia will be an unpleasant surprise for the Russian government.

“Our budget for 2025 includes a price of around $69. So, if world prices fall to $50, our oil will cost around $40. If we do not get enough money from oil exports, we will have to increase the national debt, accelerate the spending of the National Welfare Fund and ultimately reduce budget costs. , including social and defense ones,” – added Igor Yushkov.

Today, October 2, Deputy Prime Minister Alexander Novak held the 56th meeting of the joint ministerial monitoring committee of the OPEC+ countries. As reported by the Russian Ministry of Energy, Iran, Kazakhstan and Russia have confirmed that they are in full compliance with the requirements for compensation for excess production in August according to the records provided to the OPEC secretariat for September.

“In the future, the countries confirmed their willingness to fully comply with the requirements of the OPEC+ agreement,” – the department reported.