Why A Russian-Saudi Deal On Cutting Oil Output Remains Elusive
(Bloomberg) -- With oil trading near $30 a barrel, calls for orchestrated output cuts to quell global oversupply have intensified this week. Trouble is, none of the world’s largest producers, most notably Russia and Saudi Arabia, have shown they’re ready to make a move.
OPEC Secretary-General Abdalla El-Badri called on all countries, both inside and outside the group, to join efforts to revive oil prices. "It should be viewed as something OPEC and non-OPEC tackle together," he said on Monday.
Iraq’s oil minister said on Tuesday that Saudi Arabia and Russia, the world’s two largest exporters, might be ready to become “more flexible.”
Yet there’s little sign the countries themselves are ready to reach an agreement despite the economic damage wrought by the lowest prices since 2003. Long-standing obstacles remain -- Saudi Arabia’s desire to defend market share, Russia’s inability to cut production in winter months -- and analysts say talk of a deal probably reflects the hope of producers in pain rather than the expectation of concrete action.
The two countries’ opposing views on Syria, where Russia is President Bashar Al-Assad’s closest ally and Saudi Arabia wants him gone, present another significant diplomatic obstacle.
"It will not happen -- everybody is winking, hinting," said Kamel al-Harami, an independent oil analyst and former executive of state-owned Kuwait Petroleum Corp. "The Saudis won’t do it without the Russians. Unless Russia accepts to cut, I don’t see it happening.”
The signs from Saudi Arabia and Russia, which together with the U.S. are the only countries pumping more than 10 million barrels a day, are that a deal isn’t under consideration.
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