Saudi Arabia, Russia agreed to lift oil output last month, told United States
MOSCOW/DUBAI (Reuters) – Russia and Saudi Arabia struck a private deal in September to raise oil output to cool rising prices and informed the United States before a meeting in Algiers with other producers, four sources familiar with the plan said.
US President Donald Trump has blamed the Organization of the Petroleum Exporting Countries (OPEC) for high crude prices and called on it to boost output to bring down fuel costs before the US congressional elections on November 6.
The deal underlines how Russia and Saudi Arabia are increasingly deciding oil output policies bilaterally, before consulting with the OPEC.
The sources said Saudi Energy rest of Minister Khalid al-Falih and his Russian counterpart Alexander Novak agreed during a series of meetings to lift output from September through December as crude headed toward $80 a barrel. It is now over $85.
“The Russians and the Saudis agreed to add barrels to the market quietly with a view not to look like they are acting on Trump’s order to pump more,” one source said.
“The Saudi minister told [US Energy Secretary Rick] Perry that Saudi Arabia will raise output if its customers asked for more oil,” another source said.
Originally, the two countries had hoped to announce an overall increase of 500,000 barrels per day (bpd) from Saudi-led OPEC and non-OPEC Russia at a gathering of oil ministers in Algiers at the end of September.
But with opposition from some in OPEC, including Iran which is subject to US sanctions, they decided to defer any formal decision until a full OPEC meeting in December.
Since then, Reuters has reported that Riyadh planned to lift output by some 200,000 bpd to 300,000 bpd from September to help fill the gap left by lower Iranian output due to the sanctions.
Russian output rose 150,000 bpd in September.
“I would expect Russia’s oil production will hover at around 11.4 to 11.6 million bpd until the end of 2018 and may increase further to 11.8 million bpd later on in 2019,” a source at a major Russian oil company said.
Russian produced 11.36 million bpd in September, up from 11.21 million bpd in August, Energy Ministry data showed.
Perry was made aware of the Saudi-Russia plan to lift output before the Algiers gathering, meeting with Falih three times in September and Novak once. The three did not meet together.
PERRY’S SPOKESWOMAN Shaylyn Hynes did not comment on details of the talks but said the energy secretary, “continues to be engaged with leaders from other major oil producing nations and remains confident in their ability to boost output if needed.”
She said Perry had in recent meetings “impressed upon his counterparts that keeping supply up is important for the global economy.”
Oil prices rose to $85 a barrel this week as buyers of Iranian crude wound down their purchases to meet the terms of US sanctions on Tehran.
Sources said Riyadh would help fill that shortfall because buyers needed replacement supplies. Saudi Arabia has spare capacity to produce oil at a higher rate and holds a large volume of crude in storage.