Analysts wait to see if the Saudis will demand a lifting of output restrictions at the upcoming OPEC meeting. File Image / Pixabay
As Alexander Novak and Khalid al-Falih, energy ministers for Russia and Saudi Arabia respectively, looked on, team Russia on Thursday thrashed the Saudis 5-0 in the tournament opener of the 2018 World Cup in Moscow; however, sentiments between the two countries were considerably more convivial off the field, with regards to working together in the oil and gas sector.
A statement issued after their meeting in Moscow disclosed that the ministers have agreed to expand cooperation in the oil and gas sector and will also work towards a comprehensive bilateral agreement.
According to the Russian news agency Tass, "The sides intend to be guided by the principles of seeking a balanced market that relies on sufficient and steady supply.
The sides intend to be guided by the principles of seeking a balanced market
"Another principle is shared responsibility of all parties for stability of the oil market: the sides intend to ensure support for oil and gas as the key elements of the global energy balance in shaping the global regulatory agenda."
Supposedly, Russia and the Saudis plan to "bolster investment in the energy sector to increase energy efficiency and stability of the global economy, along with speeding up technological progress," according to the agency.
While the tenets of the agreement were vague and the wording bordered on rhetoric, the news verifies long-standing talk of a Russia/Saudi alliance that could prove to be formidable, and it was reinforced by Russian president Vladimir Putin meeting Saudi crown prince Mohammed bin Salman during the opening of the World Cup; reportedly, the two leaders discussed the global oil production cut agreement which Saudi Arabia as de facto leader of the Organization of the Petroleum Exporting Countries (OPEC) is leading.
Of course, all of this amounts to a colourful backdrop to the impending June 22 meeting of OPEC in Vienna, in which in will be disclosed if the cartel and Russia will boost production in order to offset declining output in Venezuela and restricted exports of crude in Iran.
The uncertainty surrounding the meeting caused traders on Thursday to boost West Texas Intermediate by a meager 25 cents to $66.89 per barrel and send Brent prices dropping by 86 cents to $75.88 per barrel; prices were said to be affected by U.S. crude output hitting a record 10.9 million barrels per day, according to preliminary weekly figures.
Stephen Brennock, analyst at PVM Oil Associates, remarked, "A wait-and-see approach is taking hold across the energy complex as market participants buckle down ahead of next week's crunch OPEC/non-OPEC meeting."
Presumably the emerging alliance between Russia and the Saudis makes sense to J.P. Morgan and falls in line with its forecast, expressed earlier this week, that an all-out "battle royale" will eventually take place on the world stage between so-called "Big Oil" (ie: the U.S.) and OPEC, as both parties struggle to gain market share with the realization that there will eventually be a cap on crude demand due to energy transition.