Saudi Arabia to include Russia in new OPEC agreement
In an interview with the Financial Times, Prince Abdulaziz bin Salman, the energy minister, pointed out that Riyadh was hoping to develop an agreement with OPEC+, including Russia. "The world should appreciate the value of the alliance of producers," he said.
However, he believes that it is too early to discuss the details of the new agreement given the uncertainties in the market. "With the havoc you see now it’s too premature to try to pinpoint [an agreement]. But what we know is what we have succeeded to deliver is sufficient for people to say so far there is a merit, there is a value of being there, working together."
Apparently, Riyadh is willing to cooperate with Russia, resisting western pressure to exclude the country from the deal. The energy minister also stressed that the cartel could boost production in case of rising demand.
Prince Abdulaziz reckons that energy prices at petrol pumps are surging due to a lack of global refining capacity. "The determinant of the market is refinery capacity, and how do you unlock it. At least for the last three years, the whole world lost around 4mn barrels of refining capacity, 2.7mn of them just from the beginning of Covid."
He also noted that politics should be kept out of OPEC+. The authorities of oil-producing countries need to unite to solve problems with output and refining. Investments in hydrocarbons may help improve conditions in the commodity market.
In May 2020, OPEC+ reduced oil production by 9.7 million barrels per day amid falling demand for raw materials. The reason for such a decision was a protected fight against coronavirus. After that, the terms of the agreement had been adjusted several times. In August last year, the alliance increased production by 400,000 barrels per day and by 432,000 barrels per month from May 2022.
By including Russia in the OPEC+ agreement, Saudi Arabia hopes to stabilize the volatile oil market. After the start of the Russia-Ukraine conflict, Western countries and the United States imposed new sanctions against Russia. Europe intends to lower its dependence on Russian energy supplies. The US ditched Russian commodities as well.
Whereas the US has not been hurt significantly by an embargo on Russian energy imports, the EU may face an energy crunch amid skyrocketing oil and gas prices. The eurozone is going through hard times due to the hasty decisions of EU leaders. Europe has once again proved how dependent it really is on Russian energy resources, Russian President Vladimir Putin concluded.