LONDON, United Kingdom—Saudi Arabia and Russia, the twin pillars of the OPEC+ group of oil producers, look set to hold firm in refusing increases in crude production despite appeals to boost supply and stabilize price volatility.
The thirteen members of OPEC proper will meet their ten allies from the OPEC+ grouping—chief among them Russia—on Thursday for their monthly stocktake of the oil market.
Prices have seen several spikes since Russia’s invasion of neighboring Ukraine began on February 24, at one point reaching $139.13 for the benchmark Brent North Sea crude contract and $130.50 for the American WTI, close to all-time records.
Despite this analysts say OPEC+ is unlikely to deviate from the policy of cautious increases it has set out for the months ahead.
“The war in Ukraine reminded the world that we are still dependent on OPEC+ to provide the world’s energy supplies,” says Edward Moya, analyst at Oanda.
When prices have been rising, Riyadh has profited, ignoring the warnings from the G7 about the “key role” the cartel has in regulating prices.
The International Energy Agency has also been vocal on the need for Thursday’s meeting to produce “good messages which would help to relieve the strain in the oil markets.”
More so than any other member of OPEC+, “the Saudis have no real incentive to boost production as they are benefiting from the high oil prices and strong demand,” says Moya.
Another consideration for Saudi Arabia is a desire not to alienate Russia.
Coming out in favor of a big boost in production would at this moment be read as a signal that Saudi Arabia was lining up beside its traditional ally, the US.
“As the war rages, any measure which removes oil as a weapon for Putin will be read in Moscow as a provocation,” Philippe Sebille-Lopez, head of the Geopolia consultancy, told AFP.
Indeed, “by not compensating for Russia’s oil shortage,” Saudi Crown Prince Mohammed bin Salman appears to be allowing Russian President Vladimir Putin to hold “the importing world in hostage to Russian oil and gas,” says Stephen Innes, analyst at SPI Asset Management. AFP
While the US and some other states such as the UK have announced embargoes on Russian energy imports, much of Europe has not been able to follow suit, reliant as it is on Russia for 30 percent of its oil imports.
Innes says that the latest Saudi moves could also “be interpreted as a shift in loyalties from the US to Russia.”
He adds that the current crisis is “exposing gaps in its long-standing partnership with the United States.”