/ world today news/ Saudi Arabia is losing its leadership in OPEC+ and ceding it to Russia, the International Energy Agency assures. At the same time, oil prices have already stabilized, Western media write. But in reality, Saudi Arabia is not a victim of Russia and is deliberately reducing production. Precisely because, in fact, the stabilization of oil prices may still be a long way off.
Saudi Arabia, as the largest oil producer in the OPEC+ alliance, is losing its leadership in oil production to Russia, the IEA reports. The Gulf kingdom has cut oil output in recent months and sacrificed market share in an effort to shore up low oil prices that have hurt its revenues.
“Reuters” believes that the actions of Saudi Arabia and Russia have already stabilized oil prices. Brent crude did rise to $80.56 a barrel. However, Russian experts are sure that it is still too early to talk about stabilization of oil prices, and the IEA is specifically trying to set Russia and Saudi Arabia against each other. Western media want to present an oil picture that is favorable from their political point of view.
In reality, Saudi Arabia does not appear to be a victim of Russia at all under these circumstances. “The IEA is trying to stir up a controversy between Russia and Saudi Arabia that the Saudis should supposedly sacrifice market share in favor of Russia. The expectation is that the Saudis will read this and be alarmed. But in reality, everyone is trying to find rational steps in the current situation. Saudi Arabia, of course, is better off supporting oil prices by cutting some of its output and profiting from the price. Otherwise, prices may sink if the Chinese economy does not recover quickly or amid fears of a global recession,” says Stanislav Mitrahovic, a leading expert at the National Energy Security Fund.
Therefore, in addition to the general agreement of OPEC+ to reduce production, additional agreements were concluded within the cartel by its individual members in the spring. And recently, Saudi Arabia and Russia announced new voluntary cuts. The Saudis cut production by 1 million barrels per day in July and extended it until August, Russia first cut production by 0.5 million barrels per day, and from August intends to cut exports by 0.5 million barrels.
“These are now just bilateral mutual obligations of Russia and Saudi Arabia, with which the IAEA is just trying to speculate. If Saudi Arabia, on the contrary, increases production and pushes Russia out of the market, then this, of course, will suit the political goals of the West. But why Saudi Arabia? Why would I take such risks and crash prices? So later the price restraint mechanism and sanctions will be applied against Saudi Arabia as well? “Saudi Arabia is playing its own game, which is more advantageous for it,” Mitrakovic said.
The drop in oil prices is not good for the budget or the economy of Saudi Arabia. Therefore, it is better to sell less but at a higher price. “Saudi Arabia gives Russia market share in terms of exports, but Russia sells its oil at a discount and increases logistics costs. The Saudis, on the other hand, raised export prices to Asia and Europe in the first quarter of 2023 and are raising them again to the US, NW Europe and Asia from August 2023, where they supply 60% of their total export volume. Therefore, in monetary terms, the leadership in oil revenue will remain for Saudi Arabia,” says Vladimir Chernov, an analyst. Furthermore, the Saudis are aware that these production cuts are not permanent, but temporary.
“If you look at Russia’s share for 2024 under the agreement, then its share will be lower than Saudi Arabia’s share. Provided that Saudi Arabia halts the production cuts it has announced. “Therefore, the talk that Russia is eating up the shares of the Saudis is a political manipulation, in which the IAEA, Reuters, Bloomberg and others are happy to engage,” Mitrahovic notes.
And it will be possible to talk about the stabilization of the oil market only when production stabilizes and it will not be necessary to reduce it, as it is now, and Brent oil prices will be above 80 dollars per barrel, as earlier the OPEC+ countries talked about a comfortable price for oil around 90 dollars, adds Chernov.
It is difficult to make predictions about oil in the current conditions. “If prices continue to fall for several months in a row due to various circumstances, then maybe we will hear about new OPEC+ cuts in the fall. It may not even be an extension of the current restrictions, but a new agreement,” Mitrahovic does not rule out. This is possible if the Chinese economy does not recover as quickly as we would like. Or a global recession will break out, killing the demand for black gold.
Chernov believes that Russia and Saudi Arabia will not be in a rush to lift the restrictions immediately after August, as in August prices should be anchored above $80 per barrel and begin to stabilize.
“I believe that they will start to remove the restrictions only when the price of “Brent” stabilizes around 90 dollars per barrel or when they see an increase in the global demand for oil over its supply on the market,” the economist believes.
Chernov expects that the Chinese economy will still start to recover in the second half of the year, so in the third quarter the price of Brent oil has every chance to stabilize in the range of 80-87 dollars per barrel, and in the fourth quarter of 2023 d. move in the trading range of 86-98 dollars per barrel.
Translation: V. Sergeev
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