THE LEX COLUMN: Saudi Arabia and Russia outgun Opec
Countries’ relationship should support the oil price in the medium term
James Akins, former US ambassador to Saudi Arabia, once wrote a paper for the American Petroleum Institute about the lingering death of Opec. He published his broadside in 1985, after oil prices had fallen sharply. Today’s doubters should take note: Akins has passed away, but the oil cartel soldiers on.
Some doomsters can even be found within Opec itself. Iran’s oil minister, Bijan Zanganeh, warned the cartel “is going to die” if Saudi Arabia and Russia continued to make decisions on their own. The partnership is bullish for prices, whatever it means for Opec. At the weekend, Russian president Vladimir Putin informally announced that the two countries had decided to maintain agreed production limits, removing 1.2-million barrels per day. Together their output was 21.4-million barrels daily in 2018, nearly a quarter of world supply. Given the lack of spare capacity among other Opec nations, the pair can be said to outgun Opec, to which Russia does not belong.