Russia and Venezuela are discussing joint action against low oil prices, Russian Energy Minister Alexander Novak said in Moscow. Venezuelan Foreign Minister Rafael Ramirez was in Moscow for talks as part of a tour of several oil-producing nations, including Algeria, Qatar and Iran, aimed at developing a joint strategy.
Asked if he discussed joint moves to counteract the 30-percent fall in oil prices this year, Novak told reporters: “Yes, there is such an initiative.”
Russia and Venezuela, like the other countries on Ramirez’ travel itinerary, are heavily dependent on revenues from oil exports for their national budgets.
Any drive to push oil prices back up can succeed only if oil-producing nations as a group agree to cut back aggregate production in the face of weaker demand caused by slower economic growth in China, Europe and other key markets and by the US surge in shale oil production, which is reducing US demand for oil imports.
If major oil producing countries with large market positions refuse to go along with a global oil supply management strategy, oil prices may stay low for an extended period. And it appears that Saudi Arabia may be playing the spoiler in this game.
The Saudis are the world’s most important “swing producer” – a country with huge oil reserves that can ramp its oil production up or down to balance changes in supply and demand. In normal times, one would expect the Saudis to go along with other oil producing nations in cutting back production to reflect weaker demand, in order to support the oil price. But this time, they aren’t doing that.
Some Russian and Venezuelan analysts – among others – believe the US and Saudi Arabia are colluding to drive oil prices down for geopolitical reasons.
After a trip to Saudi Arabia in September, Secretary of State John Kerry was asked if past discussions with Riyadh had touched on Russia’s need for a global oil price above $100 per barrel to balance its budget. “They (the Saudis) are very, very well aware of their ability to have an impact on global oil prices,” Kerry replied.
Some analysts have speculated that one business reason for the Saudis to refuse to cut back their oil production – and therefore to drive oil prices back up – could be a desire on their part to make shale oil production in the US and elsewhere unprofitable.
Nasser al-Dossary, Saudi Arabia’s national representative OPEC, and Naimi’s deputy, Prince Abdulazis bin Salman, as well as the kingdom’s OPEC governor, Mohammed al Madhi, attended at least one of the briefing meetings, and gave the message that Saudi Arabia was prepared to withstand oil prices as low as $70 to $80 per barrel for as long as a year.
The benchmark Brent crude oil price is down to $79.
