Saudi Arabia ready to pump more oil if Russian output sinks under ban

Saudi Arabia has indicated to Western allies that it is willing to increase oil production if Russia’s output falls significantly below the weight of sanctions, according to five people familiar with the discussions.

The kingdom opposed calls from the White House to accelerate the rise in production despite oil prices Trades at near $ 120 a barrel, The highest level in a decade, arguing that energy shortages could worsen significantly this year. Saudi Arabia believes it needs to maintain spare spare capacity.

But fears of a complete shortage of supplies rose after the EU launched another round of sanctions against Moscow, including a ban on the import of Russian cargo of marine cargo into the bloc.

The EU also agreed on an agreement with the UK Avoid ship insurance Carrying Russian oil later this year, a move that analysts say is expected to greatly reduce Moscow’s ability to divert oil to other areas.

“Saudi Arabia is aware of the risks and that it is not in its interest to lose control of oil prices,” said one person who was briefed on the thinking of the kingdom.

Oil prices fell on Thursday, to a low of $ 112.80 a barrel in early trading from $ 116.29 at the close of trading on Wednesday. Prices reached a two-month high above $ 120 a barrel this week.

The view of Saudi Arabia is that while e The oil market It is undoubtedly close, which has driven the rise in prices, there is still no real shortage, according to diplomats and industry sources briefed on the discussions, which came ahead of the monthly meeting of the OPEC + oil producers’ alliance on Thursday.

But that may change as the global economic recovery from Covid-19, including the reopening of China’s major cities, will increase demand, while Russia’s oil production is likely to decline significantly. Russia produced more than 10% of the world’s oil before its establishment Invasion of Ukraine.

There were tensions between the United States and the Saudi leadership, including with Regent Muhammad bin Salman, the de facto ruler of the kingdom. Saudi Arabia has repeatedly rejected calls from the White House and the G7 to accelerate immediate production growth.

But several visits in recent weeks by a high-level U.S. delegation, including Brett McGurk, the White House’s Middle East policy coordinator, and Amos Hochstein, the White House’s energy envoy, have helped improve relations, according to a man familiar with diplomacy.

People familiar with the talks said Saudi Arabia had agreed to a concrete change to try to calm prices as part of Joe Biden’s approach to the administration. It also offered promises that it would eventually respond by raising production if a supply shortage hit the oil market.

“Such steps are in the realm of possible in response to a substantial positive movement on the American side,” said Ali Shihabi, a Saudi commentator familiar with the leadership’s thinking, referring to efforts to smooth relations ahead of a possible visit by President Biden. sleep.

One diplomatic source said there had been discussions of an immediate increase in production from Saudi Arabia and the United Arab Emirates, which could be announced at an OPEC meeting on Thursday.

Increased production planned for September will be brought forward to July and August, the source said, though the group will have to approve the change.

Christian Malek, head of oil and gas at JPMorgan, said Saudi Arabia was still “afraid to exploit all its spare capacity” as “it believes it needs enough reserves to be able to respond to what may develop in the market”.

“Although the burning of all available capacity will now be too early, they are ready to respond if the market starts to get out of control. They see available capacity as the last line of defense against the recession risk of oil rolling higher.”

Saudi Arabia’s energy minister, Prince Abdullah’s bin Salman, the Crown Prince’s half-brother, has emphasized that he is still Considers Russia a critical partner In the Opec + Alliance. The countries have led the expanded oil producer group since 2016.

However, Moscow can be offered an exemption from its output target if its production drops significantly. Both Libya and Iran have in the past received exemptions from OPEC + targets when war and sanctions hampered their ability to produce.

Russia’s Foreign Minister Sergei Lavrov is visiting Riyadh this week to meet with his Saudi counterparts and the United Arab Emirates. They reaffirmed their agreement to continue collaborating on Opec +. The group of oil exporters cut production sharply in April 2020, but added some output every month.

“Even as Saudi-US relations approach, the kingdom will not turn its back on Russia,” Amrita Sen told Energy Aspects.

Saudi Arabia ready to pump more oil if Russian output sinks under ban Source link Saudi Arabia ready to pump more oil if Russian output sinks under ban

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