OPEC members still trying to broker an end to Saudi-Russia price war

Several OPEC members, largely bystanders suffering amid the Saudi-Russia oil price war, continue to press for a new production accord to stem the market rout.

Algerian energy minister Mohamad Arkab, who holds OPEC’s rotating presidency this year, and his staff have been extremely active in attempting to round up enough support to try and convince Saudi Arabia to consider an alternative tack, according to sources in the organization.

But with the kingdom so far standing firm in its plans to ratchet up its production starting next month, the prospects of any new deal seem scant.

Arkab’s latest gambit, after a call by Iraq for an emergency OPEC meeting failed to gain traction, is to call for a delegate-level meeting of the organization’s Economic Commission Board.

“The objective of the meeting is to assess current market conditions and immediate prospects, to explore various scenarios, and to exchange views on ways and means to stabilize the oil market,” Arkab wrote in a letter to OPEC Secretary General Mohammed Barkindo on Thursday.

He asked Barkindo to organize a teleconference of the ECB by April 10 and to prepare a report on the oil market’s short- and medium-term prospects for ministers to review.

Barkindo could not be reached for comment, nor could Saudi energy ministry officials.

A report by the official Saudi Press Agency on Friday said that Saudi energy minister Prince Abdulaziz bin Salman and Russian counterpart Alexander Novak have not held any discussions about a joint agreement to balance oil markets, indicating no resolution to the price war.

Saudi Arabia, the de facto leader of OPEC, has announced it will hike production by about a third and supply a record 12.3 million b/d of crude to the market.

Close ally the UAE has also said it will boost its output by a third to hit 4 million b/d.

Novak has said Russia could raise its production by up to 300,000 b/d in the short-term and 500,000 b/d in the long-term, which would bring its crude output to almost 11 million b/d.

“The market mood is not good to absorb” the coming supply surge, one OPEC delegate told S&P Global Platts on condition of anonymity.

Other international attempts to mediate the Saudi-Russia spat have yet to forge any detente, including a G20 leaders videoconference summit Thursday hosted by Saudi Arabia’s King Salman bin Abdulaziz.

The US, with its shale sector at risk of collapse from the price plunge, has urged Saudi Arabia to ease off the price war, citing the global economic havoc already wreaked by the coronavirus pandemic.

Stephen Brennock, an analyst with brokerage PVM Associates, said the oil market “is facing an oversupply of biblical proportion.”

“Ending [the Saudi-Russia] price war would make financial sense but both sides seem likely to stick to their current course in the near-term,” he said in a note to clients Friday. “In short, a return to the era of price supportive production cuts is currently a pipedream.”
Source: Platts