Saudi Arabia Does Not Negotiate Oil Production Cuts with Russia

[Image source=Yonhap News]

[Asia Economy Reporter Hwang Yoon-joo] Reuters reported on the 27th (local time) that Saudi Arabia is not negotiating with Russia regarding the adjustment of international crude oil supply and demand.

Reuters quoted an official from the Saudi Ministry of Energy saying, "The energy (oil) ministers of Saudi Arabia and Russia have not been in contact," and added, "There has been no discussion about expanding OPEC+ (the coalition of OPEC and 10 major non-OPEC oil-producing countries) member countries or about balancing the crude oil market."

Before this report, Kirill Dmitriev, chairman of the Russian Direct Investment Fund (RDIF), said, "To rebuild the global economy, joint measures by multiple countries are necessary," and added, "This can be possible within the framework of OPEC+."

Earlier, on the 6th, OPEC+ failed to reach an agreement on crude oil production cuts due to Russia's opposition. Subsequently, Saudi Arabia announced plans to increase crude oil production. Analysts interpreted Russia's opposition to production cuts as a concern over losing market share. As Saudi Arabia competitively decided to increase crude oil production, a 'price war' ignited. Saudi Arabia plans to raise production next month by 27% compared to February, up to 12.3 million barrels per day.

Meanwhile, on the 25th, U.S. Secretary of State Mike Pompeo called Crown Prince Mohammed bin Salman of Saudi Arabia to pressure him not to increase production. This is because prolonged low oil prices could lead to bankruptcies among U.S. shale oil companies. The breakeven point for shale oil companies is known to be above $50 per barrel in international oil prices.