Oil prices were lower this morning despite a successful visit to Saudi Arabia yesterday by Russia’s President Vladimir Putin.
Moscow and Riyadh are two major pillars of an international deal to curb crude production in order to bolster prices, and both Mr Putin and the Saudi’s King Salman pledged yesterday to strengthen co-operation in this area.
December summit to decide next steps
In the case of both Brent and WTI, the recent picture has been one of fairly steady decline. One month ago, on 16 September, Brent stood at $69.02 and WTI at $62.90.
Three months ago, on 15 July, Brent traded at $66.48 and WTI at $59.58, and a year ago, on 15 October 2018, Brent changed hands at $80.78 a barrel and WTI at $71.78.
Fears of a global recession, which would reduce demand, alongside oversupply, as US production rises steadily, have combined to depress the price of crude. Brent was last above $70 a barrel in May, and WTI has not topped $66 since April.
Since December 2016, the 14-nation energy cartel, the Organisation of Petroleum Exporting Countries (OPEC), has joined forces with a supportive group of non-member oil producers, known as NOPEC, to reduce output in the hope of stabilising prices. The current deal, which runs until March next year, seeks to cut output by 1.2 million barrels a day.
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A summit in December will decide whether to continue with the curbs beyond March and, if so, what the scale of the reduction should be.
Saudi Arabia is the leading member of OPEC and Russia plays a similar role in NOPEC. Other OPEC members include the United Arab Emirates, Nigeria and Libya, while NOPEC takes in Mexico, Malaysia and Oman.
Yesterday, Mr Putin and King Salman signed an agreement to bolster the OPEC-NOPEC arrangement. Saudi energy minister Prince Abdulaziz bin Salman said it would reinforce co-operation and “strengthen oil market stability”. Other agreements and contracts involved areas such as aerospace, health and agriculture.
“Exemplary handling of the situation”
Ironically, however, Saudi success in resuming oil production after a drone strike last month on energy installations may well be undermining any positive price impact of the Russia-Saudi talks. Drone attacks, allegedly launched by the Saudis’ regional rival Iran, reduced Saudi output by about 7%, but this is expected to have recovered to 9.86 million barrels a day by November.
Iran, which is also an OPEC member, denied any involvement.
Speaking in the Indian capital New Delhi today, OPEC secretary general Mohammad Sanussi Barkindo said: “We have demonstrated repeatedly our commitment to sustainable stability, even during unprecedented events like the attacks on Saudi Arabia’s oil facilities one month ago.”
He added: “In the immediate aftermath of these shocking attacks, Saudi Arabia moved swiftly to ensure a stable supply to the global market as it worked to restore its production capacity. Its exemplary handling of the situation very quickly stabilised markets and allayed concerns about supply disruptions.”