In an exclusive report Wednesday morning, Reuters reveals that Saudi and Russian oil ministers met privately last month, ahead of the OPEC meeting in Algiers, to strike a private deal to raise oil production. The agreement was communicated to U.S. officials before the meeting and before the president’s most recent tweet demanding that the Saudis raise production.
According to one Reuters source, “The Russians and the Saudis agreed to add barrels to the market quietly with a view not to look like they are acting on Trump’s order to pump more.” The two countries had agreed to announce a 500,000 barrel-per-day increase in output.
OPEC’s Joint Ministerial Monitoring Committee (JMMC) met on September 23 in Algiers and declined to raise production, essentially rejecting Trump’s plea to lift output and lower prices. Brent crude was trading at around $80 a barrel and traded above $85 a barrel on Monday.
The Saudis claim to have spare capacity of 1.5 million barrels a day that can be brought into production relatively quickly to replace barrels lost by coming U.S. sanctions that essentially will cut Iranian exports in half, if not further. Saudi oil minister Khalid al-Falih told reporters in Algiers that oil markets were “adequately supplied” and that no production increase was necessary.
Also at the JMMC meeting, Russia’s oil minister, Alexander Novak, declared that no immediate output increase was needed but he did express concern that the trade war between the United States and China threatened to reduce demand. In line with projections that demand will wane in the next six months, Novak said that Russia would stick to the production level it agreed to in June.
On September 20, Trump tweeted:
We protect the countries of the Middle East, they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices! We will remember. The OPEC monopoly must get prices down now!
— Donald J. Trump (@realDonaldTrump) September 20, 2018
Last night, Trump told a political rally in Mississippi that he told Saudi King Salman that the United States is “protecting you. You might not be here for two weeks without us. You have to pay for your military.” Presumably this conversation took place last Saturday in a phone call between Trump and Salman.
Both Russia and Saudi Arabia raised output in September. Russian production rose by 150,000 barrels a day in the month and Saudi production rose by 200,000 to 300,000 barrels a day.
Russian production could reach around 11.6 million barrels a day by the end of the year, up from 11.4 million. A further increase to 11.8 million barrels a day is possible in 2019.
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