Despite Trump's Intervention, Saudi-Russia Conflict... OPEC+ Meeting Postponed to the 9th

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] Despite U.S. President Donald Trump’s involvement in the 'oil price war' between Saudi Arabia and Russia, it seems difficult to quell the discord between the parties. Saudi Arabia and Russia blamed each other for the breakdown of the OPEC+ (OPEC and 10 major oil-producing countries alliance) production cut negotiations on the 6th of last month (local time), which triggered the oil price war.

On the 4th (local time), the Saudi Ministry of Foreign Affairs issued a statement titled "The announcement from the Russian Presidential Office distorted the truth" through the state-run SPA news agency. According to the statement, "Russia was the side that refused the production cut agreement, while Saudi Arabia and the other 22 oil-producing countries tried to persuade Russia to extend and deepen the production cuts."

It also rebutted Russia’s claim that "Saudi Arabia tried to eliminate U.S. shale oil."

The Saudi Ministry of Energy denied, saying, "Russia’s claim that we withdrew from the production cut agreement targeting U.S. shale oil is not true."

Saudi Energy Minister Prince Abdulaziz bin Salman stated, "It is surprising that there is an attempt to portray Saudi Arabia as hostile to the shale oil industry," adding, "Our Russian friends already know that such attempts are false."

Minister Abdulaziz further pointed out, "The person who first told the media that 'all oil-producing countries participating in the negotiations would be exempt from production cut obligations starting in April' was the Russian Energy Minister," and said, "Because of this, each oil-producing country increased production to compensate for losses caused by low oil prices."

Earlier, Russian President Vladimir Putin, on the 3rd, expressed a positive stance toward President Donald Trump’s proposal for production cuts, stating, "Russia was not the side that broke the OPEC+ production cut agreement on the 6th of last month," shifting responsibility to Saudi Arabia.

He added, "Saudi Arabia’s withdrawal from the OPEC+ agreement, increasing oil production and lowering prices, appears to be an attempt to outpace competitors producing shale oil (the U.S.)."

Regarding Trump’s proposal to cut 10 to 15 million barrels, President Putin said, "We are ready to reach an agreement with other oil-producing countries within the OPEC+ framework and are willing to cooperate with the U.S.," adding, "We will discuss a plan to cut about 10 million barrels per day."

The atmosphere among the parties that triggered the oil price war contrasts with President Trump’s message.

On the 3rd, President Trump met with top executives of the U.S. energy industry and emphasized his mediating role, saying that both Russia and Saudi Arabia want something to stabilize the global oil market.

At the meeting, he said he had spoken with President Putin and Saudi Crown Prince Mohammed bin Salman about oil production, stating, "We will resolve this and reclaim our energy business."

Following a call between President Trump and Crown Prince Mohammed on the 2nd, the emergency OPEC+ video conference proposed by Saudi Arabia was postponed to the 9th, according to Azerbaijan’s Ministry of Energy on the 4th, which said, "OPEC notified us of the postponement to the 9th. The reason is unknown."

The meeting is expected to discuss urgent production cuts to prevent a collapse in oil prices caused by decreased demand due to the spread of the novel coronavirus (COVID-19).

Azerbaijan’s Ministry of Energy stated that the meeting aims to adopt a "new cooperation declaration." However, the schedule change just before the meeting led to interpretations that the production cut negotiations would not proceed smoothly.

There are also expectations that Russia and Saudi Arabia will demand U.S. participation in this production cut.

This is because the production cut volume proposed by President Trump is too large for OPEC+ alone to handle, and the U.S. shale oil industry has benefited from maintaining prices around $60 per barrel through production cuts by Saudi Arabia and Russia over the past three years.

Saudi Arabia said that President Trump requested the emergency OPEC+ meeting, and some media reported that the U.S. side is also expected to attend this emergency meeting.