Saudis, OPEC Not Likely to Heed Russia's Bid for Oil Cut- Ovunc Kutlu, Anadolu Agency Energy Terminal

Arabia Monitor CEO and Chief Economist Florence Eid-Oakden shares her views on Saudi Arabia and oil markets with AA Energy Terminal.
Russia has been holding "unprecedented" talks with the Organization of Petroleum Exporting Countries and with Saudi Arabia, but experts say the cartel won't listen. A Russian senior official confirmed the talks on Wednesday at a press conference in Moscow. Russia may be seeking a cut in production, and promising to cut its own output as well. Alexander Novak, Russia's energy minister, told reporters he had spoken to OPEC Secretary General Abdulla al-Badri several days ago. Saudi Arabia's Oil Minister Ali al-Naimi also discussed the issue with Oleg Ozerov, Russia's ambassador to Riyadh, the kingdom's state news agency SPA reported on Tuesday. But Russia has been an unreliable partner in the past for OPEC, experts pointed out. "We don’t expect Saudi Arabia to change its opinion, and we doubt that OPEC’s stance will change either," Liza Ermolenko, an economist at the London-based research consultancy Capital Economics, told The Anadolu Agency. She recalled that Russia had proven to be an unreliable partner in previous agreements with OPEC, saying "Any agreement between Russia and OPEC seems unlikely." "Russia agreed to cut production in Sept. 2008, when asked by OPEC, but increased it instead," Florence Eid-Oakden, chief economist of Arabia Monitor, an economic research and strategy institution in London, told AA. "This raised considerable suspicion making it hard for the Saudis to believe otherwise this time around," she added. In 2008, with the global financial crisis, oil prices fell almost 80 percent from $147 per barrel in June 2008 to $36 per barrel in Dec. 2008, a historic decline. Eid-Oakden also recalled that Saudi Arabia had cut back its production in the 1980s, hoping that other OPEC nations would follow. However this did not happen, Eid-Oakden said, adding that some members of the cartel kept or increased production levels to maintain their market shares. "The Kingdom slashed its own output from more than 10 million barrels per day in 1980 to less than 2.5 million bpd from 1985 to 1986. However, as the glut continued, global oil prices kept declining and Saudi Arabia suffered budget deficits of up to 20 percent of its gross domestic product," she explained. Saudi Arabia has learned its lesson from the mid-1980s, Eid-Oakden said. "It is clear that this time the Saudis seem determined to protect their market share instead of shouldering the burden of stabilizing oil prices." Indeed, the Kingdom kept raising its oil production to increase its market share, as its oil minister Ali al-Naimi said on April 7 his country's output reached 10.3 million barrels a day, higher than the recent 30-plus-year-record of 10.2 million barrels per day in Aug. 2013. The Arab bloc, consisting of most influential members among OPEC -- Saudi Arabia, Kuwait and the United Arab Emirates -- are against trimming oil output since OPEC's annual meeting on Nov. 27, 2014. "It is interesting to note that even if the oil price remains at the current levels, Saudi Arabia, Kuwait and the UAE would have enough cash reserves to remain in the game for several years," Eid-Oakden said. By Ovunc Kutlu Anadolu Agency ovunc.kutlu@aa.com.tr

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