A Saudi-Russian Oil Détente? Not Likely
Freight cars filled with petroleum sit at a refining and petrochemical plant in Nizhenekamsk, Russia, on July 30, 2015.
Photographer: Andrey Rudakov/Bloomberg
Most oil analysts and traders were intrigued when Russia’s energy minister signaled on Jan. 28 that the Kremlin wanted to discuss oil production cuts with OPEC. After all, limiting supply may help bolster the collapsing price of crude, which is hurting all major petroleum powers. Yet no one was surprised when the Saudis didn’t jump at the chance to meet with the Russians.
The Saudis have insisted that OPEC won’t cut output unless other major exporters like Russia, the world’s top producer, reduce output as well. “Russia has zero credibility with OPEC and with Saudi Arabia in particular,” after promising cuts during previous crises and then failing to deliver, says Citigroup analyst Seth Kleinman. Russia pledged to curb output when oil crashed in 2001 but instead increased its crude exports while Saudi Arabia cut back. The Russians did the same in 2008, leaving OPEC to shoulder the burden of output reductions.