• Saudi Arabia claims short sellers are to blame for disappointing oil prices
• Commodity analyst sees Russian oil exports as the biggest threat
• Can Saudi Arabia “keep Russia in check”?
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In the past twelve months, oil prices have fallen from around USD 120 per barrel to between USD 70 and USD 80 most recently (as of June 5, 2023). According to commodities analyst Paul Sankey, Saudi Arabia has claimed that short sellers are to blame for disappointing oil prices. “To be honest, I don’t know why they are so obsessed with speculators. I mean, you can pressure speculators in the short term. But the real problem is the overall oil balance,” Sankey told Bloomberg TV.
Expert considers Russia the greatest threat
According to Sankey, Saudi Arabia should focus on Russia rather than the short sellers. After Russia’s war of aggression against Ukraine began, sanctions largely locked the country out of European markets, forcing Russia to look for alternative energy exports. The nation found these in China and India. Earlier this year, Russia’s oil exports are said to have exceeded pre-invasion levels in Ukraine. China and India are said to have accounted for about 90 percent of the crude oil shipments transported by sea – and there is little evidence that Russia will reduce its dependence on Asia. Just recently, Russian Deputy Prime Minister Alexander Novak indicated that Moscow could meet 40 percent of China’s energy needs.
Despite the good relationship between the Russian President so far Wladimir Putin and Saudi ruler Crown Prince Mohammed bin Salman, tensions may arise between the two countries co-leading OPEC+.
The question is “whether the Saudis can keep Russia in check”. “Russia is a threat to Saudi Arabia because Russia sends its oil to Asia and cuts the traditional long-term Saudi premium for selling oil to Asia,” Sankey said. “This is a much bigger deal than people estimate between Russia and Saudi Arabia in terms of market share and competition.”
OPEC+ lowers production target for 2024
As early as October 2022, the oil-producing countries united in OPEC+ agreed to cap production by two million barrels per day. In April, against the background of deteriorating economic prospects, several OPEC+ members surprisingly agreed on additional production cuts from May until the end of the year. On Sunday, Saudi Arabia then announced a unilateral cut in its production by one million barrels a day, initially for July. According to the German Press Agency, Energy Minister Prince Abdulaziz bin Salman said after the meeting that everything necessary would be done to bring stability to the market. For the coming year, the oil cartel announced a reduction of the production target by around 1.4 million barrels per day.
It remains to be seen whether the oil-producing countries can actually bring more stability to the market and how the relationship between Russia and Saudi Arabia further developed in the future.
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