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Russia is ready to cut a deal-OPEC

The December OPEC meeting should be interesting, because Saudi Arabia supported by the United Arab Emirates will ask Russia to cut oil production. After Russia started active cooperation with OPEC, the growth of its influence in the region becomes more obvious.

 

In 2016, Moscow and Riyadh took major decisions on oil production that are the focus of other OPEC producers. As Russia's position at this time remains unknown, this time Riyadh wanted Abu Dhabi helped to put additional pressure on Moscow to agree on reducing oil production.



Sheikh Mohammed bin Zayed, who is currently the ruler of the UAE, was the third governing party during the negotiations between Russia and Saudi Arabia, held in Abu Dhabi. Later transactions became clear that in the next couple of years will be one of the biggest reductions in oil production over the last decade.

 

One of the sources pointed out that “Russia wanted to signal that it supports Saudi Arabia at a critical moment and that their Alliance is strong. The role of the UAE should not be a surprise. Russia has very strong ties with the UAE.”

 

Given the fact that Saudi Arabia and Russia are the world leaders in oil exports and their total share accounted for 20% of world production, the participation of UAE (which produce only 3% of the world's supply of oil) seems incomprehensible. But during the last OPEC conference, which took place from 5 to 6 December 2019, it became known that Russia has no plans to cut production, required the regulator to resolve the coming conflict.

 

A key role in negotiations within OPEC plays the Ministry of energy of the Russian Federation and the Russian direct investment Fund, only they can explain the new conflict situation. However, neither they, not the press-service of the governments of Saudi Arabia and the UAE do not give any comments.

 

Prince Abdulaziz bin Salman, who is the Minister of energy of Saudi Arabia, first initiated to reduce oil production. This question was actively discussed during the last visit of Vladimir Putin to Riyadh in October 2019. Since then, Saudi and Russian officials are meeting in Riyadh, Moscow and Abu Dhabi to find a consensus in relation to a reduction in oil production.

 

Saudi Arabia needs to reduce oil production in order to maintain high oil prices, Saudi Aramco prior to the IPO. An important factor is the fact that, according to the International monetary Fund, to SA could balance the budget, the price of oil needs to be above 80 USD per barrel. In Moscow the fixed price of oil remains at the level of 42 USD per barrel, according to the budget for the year 2019 and the Ministry of Finance of the Russian Federation.