Perhaps unsurprisingly, the OPEC+ virtual meeting planned for Monday may be delayed after Saudi Foreign Minister Prince Faisal bin Farhan decided it would be a good idea to insult Vladimir Putin.
“Russia was the one that refused the agreement”, the Saudi foreign ministry snapped, in a statement. “The kingdom and 22 other countries were trying to to persuade Russia to make further cuts and extend the agreement”.
On Friday, in the course of saying Russia would be willing to join in a global arrangement to cut production, Putin denied any responsibility for the price collapse.
“It was the pullout by our partners from Saudi Arabia from the OPEC+ deal, their increase in production and their announcement that they were even ready to give discounts on oil”, he said, referencing Riyadh’s dramatic cuts to official selling prices for April announced on March 7, the day after an OPEC+ meeting in Vienna aimed at cementing a deal to support the market in the face of unprecedented demand destruction tied to coronavirus containment measures ended in acrimony.
“This was apparently linked to efforts by our partners from Saudi Arabia to eliminate competitors who produce so-called shale oil”, Putin added. “To do that, the price needs to be below $40 a barrel. And they succeeded in that. But we don’t need that, we never set such a goal”.
By most accounts, it was in fact Putin who wanted to drive US shale out of business, perhaps in retaliation for the Trump’s administration’s opposition to Nord Stream 2 and also in response to sanctions on Rosneft.
In other words, Putin on Friday attributed his own motives to the Saudis.
So, Putin is lying. But what else is new, right? That is, pride aside for the Saudis, what difference does it make? I’d imagine some of Russia’s inland production is at risk of being shut in at current prices (or at least at prices that prevailed before last week’s rally), and although Moscow may be in a less precarious fiscal situation than the Saudis, the total collapse of the market isn’t great for anyone.
But Riyadh is having none of it from Putin.”The Russian Minister of Energy was first to declare to the media that all the participating countries are absolved of their commitments”, Prince Abdulaziz said Saturday, in a statement of his own. “This led to the decision by countries to raise their production in order to offset lower prices and compensate for their loss of returns”.
Market watchers were already skeptical of any grand bargain and even those inclined to be optimistic warned that virtually no production cut would be large enough to offset the kind of outright demand destruction brought about by the travel restrictions and other containment measures in place around the world in association with the virus.
In any case, crude is coming off a blockbuster week. If the talks collapse, that won’t be good news for the nascent rally, and it will surely infuriate Donald Trump.
Remember: All that really matters is what Putin and Prince Mohammed say to each other, either through subordinates or directly. The rest of this is, at best, public posturing. At worst, it’s just noise.