A year ago, in the enduring twilight of one of St Petersburg’s famous “white nights” of summer, Saudi Arabia and Russia reached an agreement that set a new direction for the oil market.
This time around, President Vladimir Putin has emphasised the differences between the two architects of the Opec+ deal. He reiterated the desire to continue co-operation, but noted that his country is happy with a lower oil price than its Saudi allies and declined to say whether he supports an extension of production cuts.
“We have certain differences in opinion regarding the fair price,” Putin told reporters yesterday. “$60-65 a barrel suits us just fine” because Russia’s budget is based on $40 crude, he said.
While Saudi Energy Minister Khalid al-Falih clearly wants to prolong the group’s curbs beyond their expiry at the end of this month, his Russian counterpart Alexander Novak remains at best non-committal. Right now, they can’t even persuade the rest of the group to agree on a date for the group’s usual mid-year meeting in Vienna.
Diverging interests and surging market volatility are making their decisions more difficult. Oil is torn between the bearish influence of US-instigated trade wars and the bullish threat of supply disruptions from Iran to Venezuela. While Saudi Arabia needs higher prices and has enthusiastically reduced production, the benefits for Russia aren’t so clear and it was slower to make the cuts.
“I would expect a stronger message from al-Falih” on extending the cuts, said Giovanni Staunovo, an oil analyst at UBS Group AG in Zurich. “Novak will keep all options open.”
Novak and al-Falih are participating in the St Petersburg International Economic Forum hosted by Putin. That will be the first face-to-face meeting between the two ministers since Jeddah in May, when the gap between their interests became visible.
Novak told reporters at the forum yesterday that trade wars and sanctions are creating uncertainties that prevent strategic planning. Russian oil policy is driven by long-term concerns about investment, not short-term prices moves, he said.
The Russian president had no plans for bilateral talks with the Saudi delegation, his aide Yuri Ushakov told reporters on Tuesday. He didn’t rule out “a contact” with al-Falih on the sidelines of the forum as there may be “unplanned meetings.” 
Rosneft PJSC chief executive officer Igor Sechin, has long been skeptical of the benefits of Opec co-operation and renewed his criticism this week. Russia’s share of the global oil market is already under threat due to interruptions in exports to Europe after the Druzhba pipeline became contaminated with chemicals, Sechin said. If Russia continues to cap its oil output, rival US producers will “fill the void and take up the market share,” he said. Last month, Finance Minister Anton Siluanov said Russia will need to weigh all the pros and cons of extending the pact. The nation’s official statistics show the deal hurting the economy in the first quarter.
Still, Russian officials have also talked down the prospect of an agreement at previous meeting, only to eventually forge a deal with their allies. In an interview this week with the Saudi Press Agency, al-Falih said he sees “an emerging consensus among Opec+ countries” on cooperation in the second half of this year.
US oil prices fell back into a bear market on Wednesday as fears of a global trade war overrode any concerns about supply disruption. Just minutes after Brent crude fell below $60 a barrel for the first time since January, Opec’s top official said the group will take “economic bearishness” into account when they meet in the coming weeks, and are committed to keeping oil markets balanced this year and beyond.
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