Saudi And Russia Oil Agreement

An additional wild card is whether the non-OPEC+ producers who signed the agreement will actually respect it. Quotas for OPEC+ members are mandatory, but quotas for non-OPEC+ producers like Norway and Brazil are voluntary, meaning they will not be penalized for non-compliance with these quotas. There is no mechanism to monitor their compliance, as is the case for OPEC+ members, which facilitates ignorance of their quotas by non-OPEC+ members. The latest news about the effectiveness of vaccines in fighting the coronavirus, which has pushed oil prices to their highest level since falling in April, may have made it harder to reach an agreement. In response to these higher prices, some oil producers saw less need to keep inventories running out of water and wanted to increase pumping in an attempt to offset nearly a year with sluggish oil revenues. Later on April 3, Saudi foreign and energy ministers issued statements criticizing Putin and accusing Russia of not participating in the OPEC+ deal. [38] Combat wounds between Riyadh and Moscow are not expected to repair quickly, even because of concern over Russian quota fraud. Industry observers say Russia pumped more than its quota under each of the three previous OPEC+ agreements – and those quotas were much larger than those in the new deal. The most recent deal is also different because it aimed not only to keep prices high, but also to prevent the global market from collapsing as the coronavirus decimated demand and flooded the world with improved crude oil. Some of the lost demand will return if COVID-19 declines as a threat, but the excess supply that tempered prices before the eruption will be maintained. The price fight began on March 6, when Russia opposed an OPEC+ production cut of 1.5 million barrels per day. It ended five weeks later with an agreement that multiplies the cuts more than six, to reach a record 9.7 million barrels. This compromise is remarkable because, for the first time, consumer countries such as Germany and Japan helped 23 producer countries to draw up an agreement.

In the past, these agreements concerned only producers. On March 8, 2020, Saudi Arabia launched a price war with Russia, which allows for a 65% quarterly drop in the price of oil. [1] In the first weeks of March, US oil prices fell by 34%, crude oil by 26% and Brent oil by 24%. [2] [3] The price fight was triggered by a breakdown in dialogue between the Organization of the Petroleum Exporting Countries (OPEC) and Russia over planned oil production cuts amid the COVID-19 pandemic. [1] Russia left the agreement, which led to the fall of the OPEC+ alliance. Oil prices had already fallen by 30% since the beginning of the year due to a drop in demand. [4] The struggle for prices is one of the main causes and effects of the global stock market crash that followed. [5] “Any agreement to extend the cuts is subject to the condition that countries that have not fully complied in May deepen their cuts in the coming months in order to compensate for their overproduction,” the source said. The debacle was unpleasant for Russian President Vladimir Putin, who had to not only give in, but also give in to President Donald Trump`s efforts to negotiate a deal.

The renegotiated deal has only temporarily interrupted tensions between Saudi Arabia and Russia, but their war for global market share is likely to continue. However, there has not yet been agreement on the need to hold an OPEC+ implementation policy meeting on Thursday, with the main obstacle being dealing with countries that have failed to reduce the supply needed under the existing pact, the sources said. Under the agreement, members of the Organization of the Petroleum Exporting Countries with Russia and other countries will increase production by 500,000 barrels per day in January and possibly by a similar amount in the following months. . . .