Are Saudi Arabia and Russia headed for another clash on OPEC+ oil production cuts?

The leaders of the OPEC+ alliance, Saudi Arabia and Russia, are reportedly once again at odds over oil supply management ahead of another crucial meeting of the group next week. OPEC’s top producer and de facto leader Saudi Arabia would likely prefer the March 3-4 meetings to decide that the OPEC+ coalition holds production flat in April, Bloomberg reports.

However, the key Saudi partner in the deal, Russia, will likely be pushing for further easing of the production cuts, especially Russian Deputy Prime Minister Alexander Novak said earlier this month that the global oil market was balanced and the current price of oil fully reflected this market situation.

The two leaders of the pact are once again going into an OPEC+ meeting with diverging views on how to manage supply to the market. Oil producers need to remain extremely cautious as uncertainty on the market is still very high, Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, said last week.

Saudi Arabia, through its extra cut of 1 million barrels per day (bpd) in February and March has helped the efforts of the OPEC+ alliance to tighten the oil market in the first quarter, while demand is still relatively weaker, especially outside Asia.

The extra Saudi cut has been one of the factors that have supported the oil price rally in recent weeks. With oil above $60 a barrel, however, analysts reckon more OPEC+ members, especially Russia, would likely push for a more aggressive easing of the cuts from April.

Analysts and the market have not forgotten last March’s debacle when Russia and Saudi Arabia disagreed on how to tackle the crashing demand at the start of the pandemic and broke up the OPEC+ pact for a month. 

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