Are Saudi Arabia and Russia helping Trump out by agreeing to increase oil production?
A new report from Reuters says that Russia and Saudi Arabia “struck a private deal” in September to increase production in order to suppress oil prices. Intriguingly, the pair apparently phoned the U.S. before the Algiers meeting in late September to relay the details of their plan.
The report is an indication that Saudi Arabia was trying to respond to pressure from President Trump to lower oil prices. If the White House was informed about the secret private deal, it didn’t seem to resolve Trump’s concerns.
Just a few days after the Algiers meeting, Trump blamed OPEC for high oil prices at the UN General Assembly in New York.
Also, the secrecy behind the private deal is interesting. It demonstrates that the Saudis do not want to be perceived as doing Trump’s bidding. “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 told Reuters.
However, the downside of keeping the strategy secret is that if the oil market doesn’t know about it, or the fact that Saudi Arabia and Russia decided to ramp up production, then the effect on prices is muted. After all, Brent surged to $85 per barrel in recent days, evidence that oil traders are not convinced about OPEC’s strategy.
It may not be surprising then that the Reuters report came out when it did. Was that a deliberate strategy by the Saudis to leak the details to the press in order to inform the market? Who knows, but it came shortly after Brent rose its highest level in four years, which seems unlikely to be a coincidence.
It remains to be seen if Trump can convince the Saudis to take a more aggressive line, although it should be noted that Saudi Arabia’s decision to increase production by 300,000 bpd from August levels is not trivial. Qatar’s Minister of Energy and Industry Mohammed Bin Saleh Al-Sada defended the current OPEC strategy on Wednesday. “OPEC is not trying to manipulate the price, it’s trying to bring the market to balance,” he told CNBC.
Full article: Saudi Arabia And Russia Make Secret Oil Deal (OilPrice)