Putin: Success in Oil Production Cuts Due to Saudi Arabia

Saudi Arabia's Crown Prince Mohammed bin Salman arrives in Buenos Aires

Regional oil exporters are keen to end the intense price volatility that has characterised the market volatility which has seen the price of crude fall by about 30 percent since early October.

While Saudi Arabia and its Energy Minister Khalid al-Falih have been airing the idea of a new production cut, Russian Federation has been less convinced that it could take part in another reduction, or at least so it lets the market to believe.

Saudi Arabia led suppliers to cut production two years ago to curb a glut, then reversed course in June on concerns that U.S. sanctions on Iran could create a shortage.

The price of crude oil went down sharply from 10 in the morning, down more than a dollar.

Adding to the uncertainty in the oil markets were President Vladimir Putin's comments. Putin has reflected his comfort at oil prices hovering around $60 per barrel.

"His visit is a short one but we spent time and visited the vice president, we discussed issues on oil output, what we are doing and how to prepare for OPEC meeting".

Now, with West Texas crude inching below $50 a barrel, the Saudis are alarmed.

To rein in the glut, OPEC and its main partner Russian Federation are moving closer to an agreement around further production cuts. "Against this backdrop, the most likely outcome of next week's OPEC meeting is a fudge".

John Hancock Financial Services' Adam Wise, a strategist who takes care of a $9 billion oil and gas portfolio, stated that everyone was now looking towards the OPEC meeting next week to get a sense of which direction oil prices were going to take.

For Mohammed bin Salman, the kingdom's crown prince and day-to-day ruler, the dilemma has been sharpened by the murder of Jamal Khashoggi in the Saudi consulate in Istanbul. EIA says US crude oil inventories are now 7 percent above the five-year average for this time of year.

While gasoline supplies in the USA unexpectedly fell last week, which led to slight gains in oil prices, they were not enough to overcome the pessimism of the news of an oil supply increase in the country. The White House wants to continue pushing Iranian oil exports lower to force Tehran to negotiate a new nuclear deal, which would require a helping hand from Riyadh to keep the market under control.

"This led to positive results", Putin said. The global benchmark crude traded at an $8.45 premium to WTI.

Russian Federation also appears to be in no hurry to cut production, which is at the record level of roughly 11 million barrels a day. That doesn't mean the Kremlin is about to give up its alliance with Saudi Arabia, which extends beyond oil, but it means could drive a hard bargain. "As Saudi Arabia we can not do it alone, we will not do it alone".

By August 2018, Saudi Arabia's production was up by 630,000 barrels per day compared with June 2014 and Russia's output had climbed by 525,000 bpd.

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