A move that could “anger” America… What are Saudi Arabia and Russia preparing for the “Wednesday meeting”?

Saudi Arabia is seeking to raise oil prices at a key meeting in Vienna in a move that will anger the United States and help Russia, according to international newspapers including the Financial Times.

Riyadh, Moscow and other producers are expected to announce deep production cuts at an OPEC+ meeting on Wednesday, according to people familiar with the discussions.

The size of the cut has not yet been agreed, but Saudi Arabia and Russia are pushing for cuts ranging from one million to two million barrels per day or more, although these cuts could be phased in over several months.

Analysts said the move would likely lead to US countermeasures.

Saudi Arabia will lead … in addition to Russia … efforts to reduce production

“The Most Important Meeting”

On Wednesday, a meeting of OPEC members as well as other producers is being held at the organization’s headquarters in Vienna, where ministers from participating countries “rushed” to the Austrian capital for what analysts described as the most important meeting in years at to live

Russia’s chief energy official, Alexander Novak, is expected to attend, and is expected to support a significant production cut, as Russian oil is already trading at a deep discount as European buyers shy away, according to the paper, which says OPEC+ producers are concerned. that a “ceiling” The prices that are planned to be imposed on Russia may later become a precedent for wider use against other producers.

Such a reduction is likely to have a significant impact on prices, which have fallen during the summer.

Prices remain high by historical standards, and with a major production cut likely, Brent crude, the international benchmark, rose above $90 a barrel on Tuesday – up 7 percent since the weekend.

Tensions between Saudi Arabia, the world’s biggest crude exporter, and the United States, the world’s biggest consumer, come as analysts warn of an escalating global energy war sparked by Russia’s invasion of Ukraine is.

Limited pricing power

However, the New York Times says that Moscow and Riyadh’s ability to control oil prices may be limited.

Even if Saudi Arabia and other major oil exporters were to cut their production targets this week and reject U.S. efforts to keep supplies flowing, the move could barely register in global oil prices.

She adds that production cuts by Saudi Arabia and its allies will reinforce the growing perception that Crown Prince Mohammed bin Salman and Russian President Vladimir Putin are working closely together to manage oil markets.

The paper says the cut OPEC Plus is considering – to one million barrels a day – could amount to little more than a “symbolic gesture”, given the compensating forces in the global oil market.

Russian President Putin speaks at a global energy conference

Russian President Putin speaks at a global energy conference

World stocks and spare capacity for production are well below levels that would ensure stability.

By early next year, European sanctions over Russia’s invasion of Ukraine aim to tighten sanctions in an attempt to limit Russian oil sales, and the United States plans to stop withdrawing its Strategic Petroleum Reserve.

But this time, according to the newspaper, the decrease in supply will coincide with a decrease in demand in China and Europe.

low demand

And the New York Times quotes Andrew Lipow, president of Lipow Oil Associates, a Houston-based consulting firm, as saying that “with crude oil prices down more than 30 percent from their peak earlier this year, OPEC Plus is now worried about a recession it will reduce demand.”

Energy experts say that whatever OPEC Plus announces is likely to translate into a supply reduction of about 500,000 barrels per day, or about 0.5 percent of global supplies, according to the paper.

The newspaper quoted Rusty Brasil, CEO of RBN Energy, another Houston-based consulting firm, as saying that the number of cuts is not huge, but “the OPEC Plus cut will definitely affect the market, just by the signal it sends that OPEC Plus is ready to cut production to maintain the oil price.” of decline.”

During the 2008-2009 financial crisis, prices fell from $145 to $35 per barrel in just five months.

In 2014-2015, as economic growth slowed, oil fell more than 50 percent in nine months, to $45 a barrel.

Prices rose again until the Covid-19 pandemic hit, when demand collapsed, briefly plunging below zero within hours as producers had to pay buyers for oil they had nowhere to store.

With its economies at risk, Saudi Arabia and its allies are seeking to stabilize the market as the world slowly recovers from the pandemic.

After cutting nearly 10 million barrels a day of production during the pandemic, OPEC Plus output gradually recovered until last month, when it announced a slight decrease.

Russia wants the highest possible prices to compensate for lower exports to Europe.

These prices are under pressure not only from a slowing economy, but also from increased oil production in the United States, Brazil and other countries. Kuwait and other OPEC Plus countries are investing to expand their production capacity.

Unable to get the Saudis and their allies to produce more, the Biden administration has released about 160 million barrels of crude from the strategic reserve since March. It recently extended these versions by another month.

Lawrence Goldstein, director of special projects at the Energy Policy Research Foundation, a Washington think tank, told The New York Times that the potential OPEC+ action “could interestingly lead to a move by the United States to cut the exemption.” of the strategic reserve, which was It was largely created as a barrier against OPEC’s ability to print global supplies.

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