BY CONTINUING TO USE THIS SITE, YOU ARE AGREEING TO OUR USE OF COOKIES. REVIEW OUR
COOKIE NOTICE

Register with us today

and in less than 60 seconds continue your access to:Latest news headlinesAnalytical topics and featuresCommodities videos, podcast & blogsSample market prices & dataSpecial reportsSubscriber notes & daily commodity email alerts

Already have an account?

Log in to register

Forgot Password

Please Note: Platts Market Center subscribers can only reset passwords via the Platts Market Center

Enter your Email ID below and we will send you an email with your password.


  • Email Address* Please enter email address.

If you are a premium subscriber, we are unable to send you your password for security reasons. Please contact the Client Services team.

If you are a Platts Market Center subscriber, to reset your password go to the Platts Market Center to reset your password.

In this list
Oil

Russia, Saudi Arabia see geopolitical risk driving oil market, when supply and demand are balanced

Commodities | Agriculture | Grains | Energy | Coal | Coking Coal | Thermal Coal | LNG | Natural Gas | Oil | Crude Oil | Metals | Non-Ferrous | Steel | Raw Materials

Market Movers Asia, Aug. 19-23: China veers from US crude as trade tension persists

Oil

Platts Rigs and Drilling Analytical Report (RADAR)

NGL | Oil | Crude Oil | LPG | Oil Risk | Petrochemicals

Platts University New York

Natural Gas | Oil | Crude Oil

La argentina YPF anticipa un crecimiento constante de la producción de petróleo en Vaca Muerta

Russia, Saudi Arabia see geopolitical risk driving oil market, when supply and demand are balanced

Moscow — Russian and Saudi energy ministers see rising geopolitical risk as driving the recent oil price increase at a time when there is sufficient supply in the market -- a view that resonated with many delegates at Russian Energy Week, as the industry prepares for Iran sanctions to come into force on November 4.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

"Prices are continuing to rise and I think that proves the point that it is not the fundamentals of oil supply and demand that is behind this price increase," Saudi energy minister Khalid al-Falih said, during a key session of the forum Thursday.

"The market has a strong influence -- financial investors, speculators, sentiment, future expectations. The true elephant in the room is geopolitics. That has all combined to feed the market frenzy," he added.

Russian energy minister Alexander Novak echoed that geopolitical risks are having a disproportionate impact on prices, even though the OPEC-led group has achieved good results in balancing supply and demand and reducing excess stocks on the market.

"The price today, in my opinion, reflects very significant uncertainty and risks, and in this sense the market is not yet balanced," Novak said.

As the OPEC-led group faces ongoing pressure from the US to further increase production to cover potential supply shortages when Iranian sanctions come into force in November, Novak said that a lot depends on customer behavior, which is making it difficult to forecast how the market will develop.

"A lot will depend on the actions not only of the US and Iran, but also key customers of Iranian crude. European countries have already started cutting purchases. But we do not fully understand how Asian countries will respond. Will China continue to buy, maybe in greater quantities? In this case, will Iranian barrels just be redirected?" he said.

While much of the market focus is currently on risks related to the Iran sanctions, many other countries are seeing production declines, Falih added.

He described the market as "fixated on one supplier -- Iran", but listed Venezuela, Mexico, the North Sea, South Sudan, Libya and Canada as other areas that could further exacerbate declining global output.

Vagit Alekperov, CEO of leading Russian oil producer Lukoil, echoed the ministers' opinions.

"We have learnt how to manage geological, economic and logistical risks but company heads ... do not impact geopolitics [which] is a much greater risk for us than oil price fluctuations," he said.

Alekperov described the current price of over $80/b as "not objective," adding that sufficient volumes are being supplied to the market today to keep prices lower.

SPARE CAPACITY

Falih gave assurances that Russia and Saudi Arabia will continue to focus on making sure that supply is sufficient, and that today the market is "well supplied and some will argue even oversupplied." But concerns remain about spare capacity.

Falih said earlier in the day that the Kingdom?s spare capacity is 1.3 million b/d and described this as "sufficient," despite some in the market speculating that producers with spare capacity may struggle to fully compensate for Iranian barrels expected to leave the market in November, as well as other potential supply disruptions.

"I think the market should be comfortable about supply," Falih said, adding that Saudi Arabia will be ready to increase production once it sees customer demand for extra barrels.

Russia has also said that it can ramp up production in coming months.

Novak said Wednesday that Russia can boost its output by another 200,000 to 300,000 b/d "within several months." He added Thursday that in the longer term Russia could further increase output, but it will take some time. Russia set a record production level of 11.356 million b/d in September.

Meanwhile Alekperov called for other producers to share supply responsibility.

"I believe that countries like the US, and other oil producers must share the responsibility with Russia and Saudi Arabia to meet global demand in the near future... rather than moving it towards OPEC+ countries that have taken all the responsibility on their own," he said.

The two ministers also continued to talk up their cooperation, which until the sharp drop in prices had seemed unlikely due to the natural rivalry for markets among two of the world?s leading producers.

Falih said that the market "is big enough to absorb production" from both countries, playing down competition between the two for Asian market share. Falih acknowledged East Siberia's competitive advantage in the Pacific, but said, "Oil is very fungible, if one producer targets a certain market at the expense of another then that oil will go somewhere else." Talks on bilateral cooperation between Russia and Saudi Arabia have included cooperation on oilfield services, LNG and petrochemicals.

--Staff reports, newsdesk@spglobal.com

--Edited by Maurice Geller, maurice.geller@spglobal.com