Tensions are rising between Saudi Arabia and Russia, as Russia continues to pump huge volumes of cheaper crude oil into the market and undermining Saudi efforts to boost prices, it was reported Saturday. Saudi Arabia reportedly has expressed anger to Russia for not keeping its previous pledge to curb production in response to Western sanctions, ahead of a crucial OPEC+ meeting set for Vienna on June 4.
Earlier this week, the Saudi energy minister issued a warning to oil speculators, signalling to the market that a further production cut was possible. Still, Russia’s deputy prime minister soon contradicted him by expressing doubts about additional reductions.
In early April, Saudi Arabia, Russia and other OPEC+ members said they would cut production, which was expected to prop up oil prices; Saudi started cutting output this month, but the latest available data shows Russia keeps pumping large volumes of oil into the market, adding to a global surplus and weighing on prices.
Crude oil futures are ~10% lower than in early April despite the Saudi-led production cuts, with Brent crude closing Friday at $76.95/bbl. Saudi Crown Prince Mohammed bin Salman, the de facto Saudi ruler, has launched an ambitious plan to use his gusher of oil revenue to transform the Kingdom’s economy and is seen as under pressure to maintain higher oil prices with his budget requiring an estimated $81/bbl to pay for massive development projects at home.
After OPEC+ unveiled its surprise production cuts, Goldman Sachs raised its year-end Brent crude price forecast to $95/bbl and its forecast for next year to $100/bbl; this week, Goldman reiterated its bullish call on crude oil and other commodities.