Resona Corporate Partners: A deal between Saudi Arabia and Russia will see production levels frozen, not cut.
Hopes that a deal between OPEC and non-OPEC oil producers would lead to cuts in production have foundered. Instead, Russia and Saudi Arabia, two of the world’s biggest producers have agreed to freeze production at January levels. The accord effectively ends the battle between Saudi Arabia and Russia for market share but officials face a task of convincing other producers to cap their production levels.
Chief among the producers that must be tackled is Iran. Iran is keen to regain the market share it lost while it was the subject of international sanctions over its nuclear ambitions and is rumoured to be undeterred by the prospect of prices drifting lower.
Both Russia and Saudi Arabia are feeling the pain of low oil prices. Russia is feeling the economic effects of international sanctions placed on it following its annexation of Crimea and its involvement in the continuing hostilities in Eastern Ukraine and its currency, the rouble, is languishing at low levels against the US dollar. Saudi Arabia’s domestic budget is laden with expensive social programs introduced as part of an effort to calm its population during the Arab Spring and low oil prices are impacting upon its ability to fund these from its reserves.
“Both sides need the oil price to stabilize but these deals have a tendency to fall apart. There are tensions between Russia and Saudi Arabia that go way beyond oil; the two are at odds over the war in Syria, for example,” explained Taro Harumato, who leads energy markets research at Resona Corporate Partners.
About Resona Corporate Partners:
At Resona Corporate Partners we offer competitive industry standard charges on all of our range of markets. You can take positions from major global indices and equities, to commodities and currencies. Our portfolio managers are equipped with the latest information from our award winning analysts department to keep you one step ahead of the market.
Contact Resona Corporate Partners:
Address: 31F Breeze Tower, 4-9, Umeda 2-chome,
Kita-ku, Osaka-shi, Osaka 530-0001, Japan
Phone: +81 – 645 604 426
Email: info@resonapartners.com
Web: http://www.resonapartners.com