Saudi Arabia has signaled it will back Russia as a member of the OPEC+ oil producer group despite tougher Western sanctions on Moscow and a possible EU ban on Russian oil imports.
Prince Abdulaziz bin Salman, the energy minister, told the Financial Times that Riyadh hoped to “find a deal with OPEC+”. . . which includes Russia,” insisting that “the world should appreciate the value” of the producers’ alliance.
His comments are an important sign of support for Russia from a traditional US ally as the West tries to isolate the country and its oil production plummets, raising questions about its place in the world. OPEC+ group.
As energy consumers grapple with oil prices that are at their highest level in a decade, a set of OPEC+ production quotas put in place in April 2020 are set to expire in three months.
Riyadh has resisted Western pressure to increase crude output to bring down prices following Russia’s invasion of Ukraine, insisting there is no supply shortage .
Prince Abdulaziz said it was too early to say what a new deal might look like given market uncertainties, but added that OPEC+ would increase production “if the demand is there”.
“With the devastation you are seeing now, it is too premature to try to identify [an agreement]said Prince Abdulaziz in an interview. “But what we know is what we’ve been able to deliver, that’s enough for people to say so far there’s merit, there’s value in being there, working. whole.”
OPEC+ has stuck to its 2020 deal, under which alliance members increase total production by a modest 430,000 barrels per day each month.
But Russian production has fallen since the start of the war in Ukraine, from around 11 million b/d in March to an average of 10 million b/d in April, according to data provider OilX.
The International Energy Agency predicts that it could drop further, by up to 3 million b/d if Western powers impose tougher sanctions to reduce Europe’s dependence on energy Russia, including a possible EU ban on oil imports. India, however, has increased its imports of Russian oil since the start of the war.
Brent crude, the international benchmark, traded at around $112 a barrel last week.
Saudi Arabia, the de facto leader of OPEC and the world’s largest oil exporter, has coordinated oil production quotas with Russia since 2016 through OPEC+.
The kingdom has sought to navigate a neutral course since Russia invaded Ukraine. Crown Prince Mohammed bin Salman has spoken to Putin twice since the invasion and this month he and King Salman congratulated the Russian leader on the day the country marks a Soviet victory over Nazi Germany.
Prince Abdulaziz blamed the spike in prices at petrol pumps on the lack of global refining capacity and taxes.
“The market driver is refining capacity and how to unlock it,” he said. “At least in the last three years, the whole world has lost about 4 million barrels of refining capacity, including 2.7 million since the start of Covid.”
Some OPEC+ members have also consistently failed to meet their production quotas, and Saudi Arabia and the United Arab Emirates are the only producers with the capacity to significantly increase production.
After Russia launched its invasion in February, the West initially avoided imposing sanctions on Russian energy assets due to Europe’s heavy dependence on gas and oil exports from the country.
The United States and the United Kingdom banned oil imports from Russia in March. But EU states remain divided over moves to phase out Russian oil supplies, and this month dropped a proposal to ban the EU shipping industry from shipping Russian crude.
Prince Abdulaziz said politics should be kept away from OPEC+, adding the alliance would be needed to make “orderly adjustments” going forward amid uncertainty over coronavirus lockdowns in China, global growth and supply chains.
He said to reduce bottlenecks in production and refining capacity, governments must encourage industry to invest in hydrocarbons even as nations shift to cleaner energy sources.
“This situation needs people to sit down together, concentrate, pull out the charade and the so-called political correctness. . . it’s about trying to relate to the existing reality and find remedies for it.
Additional reporting by Tom Wilson in London