Russian president Vladimir Putin met with Saudi Defense Minister in Sochi on October 11th, while Russian Foreign Minister Sergei Lavrov was holding a meeting with his Saudi counterpart. The parties discussed Syria and agreed upon the necessity to prevent the creation of a terrorist caliphate. The levers of a hypothetical Russian-Saudi deal would be: a rise in oil prices, possibly accompanied by Saudi arms purchases, and on the Russian side, the guarantee that Assad will leave after a transition period, along with some kind of a Saudi “right of scrutiny” on Russian arms sales to Iran.
Saudi King Salman’s lavish tour of Asia had a mission – to cement the kingdom’s place as leading oil supplier to the world’s biggest consumer region. The string of deals inked on his three-week tour to Malaysia, Indonesia, Japan, and China – the big prize – also point to a fresh strategy: growth in the downstream. Chief executive officer of Aramco, Amin Nasser, said on this: “The growth in that sector is very important, and anything integrated between refining, petrochemical, with marketing and distribution, is of interest to us.”
Saudi Arabian King Salman bin Abdul-Aziz al-Saud and Japan PM Shinzo Abe met in Tokyo and agreed to launch a feasibility study on setting up special deregulated economic zones to attract Japanese firms to the Middle Eastern country. A joint statement entitled Saudi Japan Vision 2030 identified nine main areas of cooperation, including energy, competitive industry, investment and finance, health care and medicine, and high-quality social infrastructure. This was the first visit to Japan by a Saudi Arabian king in 46 years, and considered “historic.” Saudi Arabia is Japan’s largest oil supplier.
Some 1.5 million of an agreed upon 1.8 million barrels per day of oil has been taken out of the market in January, Saudi Energy Minister Khalid al-Falih said. He noted, however, that at the same time shale oil is estimated to grow this year at 200,000 to 300,000 barrels per day – not at the 500,000 bpd estimated by the International Energy Agency. Al-Falih indicated that OPEC countries could cut oil production again this year if higher prices were not maintained due to reasons beyond the control of producers, including falling demand.
Saudi Arabia’s long-awaited drive to free up more oil revenue by shifting to solar power generation is expected to pick up speed next quarter, according to local developers eyeing contracts. “I’m fully expecting within the first quarter 500 megawatts to come out in tenders and then it’ll ramp up,” said Paddy Padmanathan, the chief executive officer of Acwa Power International in Riyadh. “That will be a game changer for the region.” Power demand growth in Saudi Arabia is one of the largest in the region.
OEF REVIEW:Saudi Arabia and Russia have taken the first step to stem the slide in oil prices. There’s just one problem: If they are successful — and that’s a big if — the wildcatters of Texas, Oklahoma and North Dakota are waiting to pounce. With 4,000 wells drilled and just waiting for better prices to be brought on stream, the so-called fracklog could act as a cap to any oil rally, industry executives, traders and OPEC officials said. Worse, a price recovery could effectively bail out dozens of shale companies now struggling with $30-a-barrel oil, allowing them to return to the capital market.
OEF REVIEW:Ali al-Naimi, Saudi Arabia’s oil minister, called the agreement by the four producers “simply the beginning of a process to assess in the next few months and decide whether we need other steps to stabilize and improve the market.” Analysts noted, however, that the agreement still needs the cooperation of Iran and Iraq.
OEF REVIEW:Ministers from Saudi Arabia and Russia met in Doha along with their counterparts from Venezuela and Qatar. Saudi Arabian oil minister Ali al-Naimi said: “Freezing now at the January level is adequate for the market. We don’t want significant gyrations in prices, we want to meet demand. We want a stable oil price.”
OEF REVIEW:The world’s two most powerful oil producers have reached a tentative agreement to freeze oil production at its current levels, dashing hopes of a supply cut for the world’s glutted market. Meeting in Doha, Russian, Venezuelan, Qatari and Saudi Arabian oil ministers reached a deal to not exceed production from their January levels, but only if it was followed suit by other producers such as Iran and Iraq. Forward prices for Bent crude plunged by as much as 3 percent on the news to $33.68 a barrel, reversing days of gains.
OEF REVIEW:The United Arab Emirates’ energy minister has said that OPEC was willing to cooperate on an output cut. Many traders were skeptical noting that Venezuela and Russia had tried in vain to stir Saudi Arabia and other major producers into agreeing to cuts, but after a price slump that has taken crude prices to more than 12-year lows, many of these traders were inclined to believe that a rebound was due sooner or later. “We expect declining U.S. oil production, in particular, to drive the oil price back up to $50 per barrel by the end of the year,” Frankfurt-based Commerzbank said in a note.
OEF REVIEW:Saudi Arabia outlined ambitious plans on Monday to move into industries ranging from information technology to health care and tourism, as it sought to convince international investors it can cope with an era of cheap oil. A meeting and presentation at a luxury Riyadh hotel was held against a backdrop of low oil prices pressuring the kingdom’s currency and saddling it with an annual state budget deficit of almost $100 billion.
OEF REVIEW:“If there is a war confronting Iran and Saudi Arabia, oil could overnight go to above $250, but decline [back] down to the $100 level,” (…) “If they attack each other’s loading facilities, then we could see oil spike to over $500 and stay around there for some time depending on the extent of the damage.”
OEF REVIEW:A potential initial public offering is under review for Saudi Arabian Oil Co., also known as Aramco, Mohammed bin Salman, the kingdom’s deputy crown prince, said in an interview with The Economist. A decision will probably be taken in the next few months, he said, without giving further details. “Personally I’m enthusiastic about this step,” Salman said. “I believe it is in the interest of the Saudi market, and it is in the interest of Aramco” by helping to promote transparency and counter corruption, he said. “This is an epochal change in the oil industry,” said Bob McNally, founder of Washington-based consultant The Rapidan Group and a former senior White House official. “Saudi Arabia is getting ready to ride the oil-price roller-coaster, not control it.”
OEF REVIEW:Russian president Vladimir Putin met with Saudi Defense Minister in Sochi on October 11th, while Russian Foreign Minister Sergei Lavrov was holding a meeting with his Saudi counterpart. The parties discussed Syria and agreed upon the necessity to prevent the creation of a terrorist caliphate. The levers of a hypothetical Russian-Saudi deal would be: a rise in oil prices, possibly accompanied by Saudi arms purchases, and on the Russian side, the guarantee that Assad will leave after a transition period, along with some kind of a Saudi “right of scrutiny” on Russian arms sales to Iran.