(Bloomberg) — Saudi Arabia’s de facto leader, Crown Prince Mohammed Bin Salman, and Russian President Vladimir Putin urged other OPEC+ oil producers to stick with agreed production cuts, as energy prices come under renewed pressure from an acceleration in coronavirus cases.
The two spoke on Tuesday, reviewing efforts to balance supply and demand in the oil market and boost the global economy, the official Saudi Press Agency said. They “agreed on the importance of all oil-producing countries to continue cooperating and abiding by the OPEC+ agreement to achieve these goals for the benefit of both producers and consumers,” according to SPA.
With new coronavirus outbreaks in Europe and the Americas weighing on demand, many in the market question whether OPEC+ will increase output by 2 million barrels a day from January as part of a plan to taper cuts started in May. The group — an alliance of the Organization of Petroleum Exporting Countries and others such as Russia and Mexico — is set to decide its policy when all members meet on Nov. 30-Dec. 1.
While oil prices have more than doubled since OPEC+ began curbing supplies — initially by almost 10 million barrels a day — Brent crude is still down 36% this year at around $42 a barrel.
Several OPEC+ nations have breached their quotas at various stages in the past six months, including Iraq, the United Arab Emirates, Nigeria and Angola. Saudi Arabia and Russia, the leaders of the alliance, have sought compensatory cuts from them.
It’s getting tougher for producers to stick to supply caps with their economies under so much strain, according to Tarek Fadlallah, the chief executive officer of Nomura Asset Management’s Middle Eastern unit.
“The pandemic has persisted for much longer than had been anticipated in March or April,” Fadlallah, who’s based in Dubai, said in an interview with Bloomberg Television on Wednesday. “Oil supply has been relatively constrained by the agreement that OPEC+ has worked so hard to maintain. But it’s increasingly difficult for member states to keep to those quotas as they come under intensifying fiscal pressures.”
Tuesday’s phone call, also reported by the Kremlin, came before a small group of OPEC+ ministers are scheduled to review compliance with production cuts on Oct. 19.
(Updates throughout, including with analyst’s quote in sixth paragraph.)
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