Russia has problems with Saudi Arabia over oil
3 June 2025 10:03
Saudi Arabia and Russia were forced to reach a difficult compromise on OPEC policy on Saturday, as Riyadh insisted on accelerating the increase in oil production, while Moscow advocated a pause in the process. This was reported by four OPEC sources familiar with the negotiations, "Komersant Ukrainian" reports citing Reuters.
Tensions between the two most influential OPEC members are growing after several years of smooth cooperation. The last time Moscow and Riyadh argued over policy was in 2020, when all OPEC members produced oil at their own discretion, which led to a collapse in black gold prices.
Compromise decision to increase production
On Saturday, eight key OPEC members agreed to increase production by 411 thousand barrels per day starting in July, after decisions were made in May and June to increase production by similar amounts. In this way, the group is gradually abandoning the voluntary production cuts introduced over the past five years to support the market.
However, unlike the political debates of the previous two months, Saturday’s decision was more complex, according to four people familiar with the discussions.
Prior to Saturday’s meeting, Saudi Arabia lobbied OPEC to increase production by more than 411,000 barrels per day. Riyadh sought to accelerate the increase because several members of the organization, including Kazakhstan and Iraq, did not adhere to their OPEC quotas and overproduced oil this year, two of the four sources said.
Positions of the parties during the negotiations
During the meeting, Russia, as well as other OPEC members Oman and Algeria, advocated a pause in production increases, arguing that demand may not be strong enough to consume additional supply.
Both sides compromised, agreeing to increase production by 411 thousand barrels per day, the sources said.
All the sources declined to be named due to the sensitivity of the issue.
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Gradual abandonment of production cuts
In a statement on Saturday, OPEC cited healthy oil market fundamentals and low oil inventories as the reasons for the latest production increase.
OPEC has agreed to increase production by 1.37 million barrels per day since the beginning of this year.
The group is still maintaining the nearly 4.5 million barrels per day of production cuts agreed to over the past five years to support the market, which accounts for about 4.5% of global demand, according to Reuters calculations.
Technical aspects and capabilities of OPEC members
Some of the cuts were agreed based on production levels dating back to 2022, and some producers may have lost capacity and may not be able to increase production quickly due to a lack of investment in recent years.
Saudi Arabia has the largest reserve capacity among OPEC members and could quickly increase production and capture market share.
Russia, meanwhile, is facing a decline in its reserve capacity due to lower investment. Moscow will also have difficulty quickly selling additional barrels to refineries due to Western sanctions for its full-scale invasion of Ukraine.
Market reaction
On Monday, oil prices rose by 3% to over $65 per barrel, with traders attributing this to “relief” as OPEC kept its July production increase at the same level as in the previous two months.
Today, oil prices continue to rise, albeit at a slower pace.
Read more about how Saudi Arabia can bury the Russian economy in Saudi Arabia dared to blow up the oil market and hurt Russia.
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