Saudi Arabia, Russia to maintain ‘close coordination’ on OPEC+: Kremlin

Saudi Crown Prince Mohammed bin Salman and Russian President Vladimir Putin reaffirmed their countries’ commitment to the OPEC+ oil production accord among other bilateral issues in a phone call late July 17, the Kremlin said in a statement.

“The importance of continuing close coordination within the framework of OPEC+ to ensure stability in the energy market was noted,” the statement said.

A Saudi statement posted by the official Saudi Press Agency did not mention the OPEC+ agreement but said the two leaders “discussed a number of issues and topics of common interest” in a phone call initiated by the crown prince.

Saudi Arabia and Russia, two of the world’s top crude producers, co-chair the 22-member OPEC+ alliance, which has implemented 5.86 million b/d of output cuts to bolster the oil market. Saudi energy minister Prince Abdulaziz bin Salman and Russian Deputy Prime Minister Alexander Novak, who handles his country’s OPEC+ relations, will convene the group’s Joint Monitoring Ministerial Committee on Aug. 1 to assess market conditions and make recommendations on production policy.

OPEC+ ministers on June 2 agreed to extend 3.66 million b/d of their cuts through the end of 2025, while another 2.2 million b/d in cuts would stay in place through September 2024, when they would be gradually rolled back over a year, if market conditions allow.

Platts, part of S&P Global Commodity Insights, assessed Dated Brent at $86.20/b on July 17, up 13.5% from the 2024 low of $75.92/b on June 4, as the OPEC+ cuts have tightened the market as seasonal demand has increased. But prices are still below the level that many members need to balance their budgets.

Novak said July 15 that the alliance will make sure the market does not become oversupplied even if it begins scaling back its cuts.

“The market will always be balanced thanks to our actions,” he said.

Saudi Arabia and Russia have remained aligned throughout Russia’s invasion of Ukraine, which has dramatically shifted oil flows globally and made Moscow the target of western sanctions and condemnation.

Russian crude production, which is subject to a quota under the OPEC+ agreement of 8.98 million b/d, has been volatile due to the sanctions, as well as airstrikes conducted by Ukraine targeting oil facilities. In recent months it has breached its quota, which obligates it to implement extra so-called “compensation cuts” to make up for its overproduction.

The latest Platts OPEC+ survey by S&P Global Commodity Insights, one of seven secondary sources used by the group to monitor member production, estimated Russia’s June output at 9.10 million b/d – its lowest since December 2020 but still above its quota.

Russia has acknowledged the quota breach and has pledged to make compensation cuts by the OPEC+ deadline of September 2025 but has not announced its exact schedule of cuts. Energy ministry officials have said that technical reasons make it more feasible to close wells and reduce flow rates during summer months.

Overall, the OPEC+ alliance pumped 40.87 million b/d in June, the Platts survey found, down 130,000 b/d from May. Member countries with quotas produced 220,000 b/d above quota. Besides Russia, other major overproducers included Iraq and Kazakhstan, who are also required to make compensation cuts in the coming months.
Source: Platts