Saudi Arabia denies contact with Russia over OPEC+ deal

DUBAI: Saudi Arabia has denied it has had any contact with Russia’s Energy Ministry over the possibility of a new OPEC+ deal to rebalance global oil markets.

A statement from the Saudi Energy Ministry dismissed reports from Moscow that there had been discussions between Russia and the Kingdom aimed at resurrecting the OPEC+ alliance, and even bringing in new members.

“There have been no contacts between Saudi Arabia and Russian energy ministers over any increase in the number of OPEC+ countries, nor any discussion of a joint agreement to balance oil markets,” a ministry official said in a statement.

The denial followed quoted comments in the Russian and international media by Kirill Dmitriev, CEO of the Russian Direct Investment Fund (RDIF), to the effect that a new arrange- ment was desirable in light of turmoil in global energy markets

Since the OPEC+ partnership led by Saudi Arabia and Russia fell apart in Vienna earlier this month, energy volatility has been exacerbated by the accelerating coronavirus outbreak and a big drop in global demand for oil and gas.

“Joint actions by countries are needed to restore the global economy. They are also possible in the OPEC+ deal framework,” Dmitriev told Reuters. He declined to identify which countries he thought should get involved in any new OPEC deal. Dmitriev, whose RDIF wealth fund is a significant invest- ment partner of Saudi Arabia, was a member of the team led by Russian Energy Minister Alexander Novak that took part in the OPEC+ negotiations.

A Russian official who did not want to be named told Arab News that Dmitriev was speaking with the knowledge of the energy ministry and of Russian President Vladimir Putin.

“We are in contact with Saudi Arabia and a number of other countries. Based on these contacts we see that if the number of OPEC+countries will in crease and other countries will join, there is a possibility of a joint agreement to balance oil markets,” Dmitriev said.

Conditions in global energy markets have changed significantly since Saudi Arabia and Russia failed to agree bigger cuts to oil supply earlier this month. 

The Kingdom responded with deep discounts to its oil products for international customers and a surge in supply to more than 12 million barrels per day from next month.

Since then, oil demand has fallen faster than at any time in history, with some experts predicting a decline of around 20 percent from the roughly 100 million barrels per day consumed in normal economic conditions.

At the same time, the oil price has also dropped. On Friday, Brent crude, the Middle East benchmark, was down by 7.33 percent from the previous day, at $24.41 a barrel, compared with a 12-month high of $75 per barrel.

Lower oil prices are especially worrying for the American shale industry, which has much higher production and finance costs than either Saudi Arabia or Russia.

A group of American senators has written to US Secretary of State Mike Pompeo urging him to ask Saudi Arabia to change its current high-output, low-price policy. “Our nation’s energy dominance, which President Trump has carefully nurtured over the past three years, is now under threat,” the lawmakers said.

The energy industry did not feature in the “virtual” summit of the G20 group of nations organized by the Saudi Arabian presidency last Thursday, but before the meeting Pompeo asked Crown Prince Mohammed bin Salman to “reassure global energy and financial markets.”