A move that could “anger” America … What are Saudi Arabia and Russia preparing for the “Wednesday meeting”?

Saudi Arabia seeks to raise oil prices at a crucial meeting in Vienna in a move that would anger the United States and help Russia, according to international newspapers, including Financial Times.

Riyadh, Moscow and other producers are expected to announce deep production cuts at an OPEC + meeting on Wednesday, according to people familiar with the discussions.

The extent of the cut has not yet been agreed, but Saudi Arabia and Russia are pushing for cuts ranging from one million to two million barrels a day or more, although these cuts could take place in stages within several months.

Analysts said the move could lead to US countermeasures.

Saudi Arabia will lead … in addition to Russia … efforts to reduce production

“The most important meeting”

On Wednesday, at the organization’s headquarters in Vienna, a meeting of OPEC members and other producers will be held, where ministers from participating countries “rushed” to the Austrian capital to participate in what analysts called the most important gathering in recent years.

Russia’s top energy official, Alexander Novak, is expected to attend and is expected to support a significant cut in production, as Russian oil is already trading at a huge discount as European buyers back off, according to the newspaper, which says that OPEC + producers are concerned that a “ceiling” on prices that should now be imposed on Russia could later become a precedent for wider use vis-à-vis other producers.

This reduction could have a significant impact on prices, which fell over the summer.

Prices remain high by historical standards and, with production cut likely, Brent crude, the international benchmark, rose above $ 90 a barrel on Tuesday, up 7% over the weekend.

Tensions between Saudi Arabia, the world’s largest exporter of crude oil, and the United States, the world’s largest consumer, come as analysts warn of an aggravating global energy war triggered by the Russian invasion of Ukraine.

Limited pricing capacity

With this the newspaper says The New York Times Moscow and Riyadh’s ability to control oil prices may be limited.

Even if Saudi Arabia and other major oil exporters cut their production targets this week, rejecting US efforts to keep supplies flowing, the move could barely register global oil prices.

He adds that production cuts by Saudi Arabia and its allies would reinforce the growing perception that Crown Prince Mohammed bin Salman and Russian President Vladimir Putin are working closely together to manage oil markets.

The newspaper said the reduction Opec Plus is evaluating – to one million barrels a day – could amount to little more than a “symbolic gesture” given the compensatory forces in the global oil market.

Global inventories and spare capacity are well below the levels that would ensure stability.

By early next year, European sanctions for the Russian invasion of Ukraine aim to tighten sanctions in an effort to limit sales of Russian oil, and the US intends to halt the withdrawal of its strategic oil reserve.

But this time, according to the newspaper, the drop in supply will coincide with a drop in demand in China and Europe.

low demand

And The New York Times quotes Andrew Lipow, president of Lipow Oil Associates, a Houston-based consulting firm, as saying that “with crude oil prices down more than 30% from their peak at the start of the year, OPEC Plus is now worried about a recession that will reduce demand. “

Energy experts say everything OPEC Plus announces will likely result in a supply reduction of about 500,000 barrels per day, or about 0.5% of global supplies, according to the newspaper.

The newspaper quoted Rusty Brasil, CEO of RBN Energy, another Houston-based consulting firm, that the number of cuts is not large, but “OPEC Plus cut will definitely affect the market, just from the signal it sends. that OPEC Plus is ready to cut production to maintain the price of oil ”.

During the 2008-2009 financial crisis, prices dropped from $ 145 to $ 35 a barrel in just five months.

In 2014-2015, with the slowdown in economic growth, oil fell by more than 50% in nine months, to $ 45 a barrel.

Prices rose again until the Covid-19 pandemic, when demand plummeted and, within hours, briefly plummeted below zero as producers had to pay buyers for oil they had nowhere to store. .

With its economies at risk, Saudi Arabia and its allies aim to stabilize the market as the world slowly recovers from the pandemic.

After cutting nearly 10 million barrels per day of production during the pandemic, OPEC Plus gradually restored production until last month, when it announced a slight decline.

Russia wants the highest possible prices to compensate for lower exports to Europe.

These prices are under pressure not only from a slowdown in the economy, but also from increased oil production in the United States, Brazil and other countries. Kuwait and other OPEC Plus countries are investing to expand their production capacity.

Unable to convince the Saudis and their allies to produce more, the Biden administration has released some 160 million barrels of crude oil from the strategic reserve since March. It recently extended these versions for another month.

Lawrence Goldstein, director of special projects at the Energy Policy Research Foundation, a Washington think tank, told the New York Times that the potential action of OPEC + “could, curiously, lead to a move by the United States to accelerate the release.” of the reserve strategy, which was created largely as a barrier to OPEC’s ability to squeeze global supplies.

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