Russian President Vladimir Putin on Thursday laid the onus on Saudi Arabia to make the case for continuing a supply cut agreement set to expire at month’s end, saying he was comfortable with current oil prices, even with a 20% slide over the past four weeks. “We have certain disagreements, linked to a different understanding of the fair price,” Putin said in St Petersburg, where his energy minister Alexander Novak was due to meet his Saudi counterpart Khalid al-Falih late Thursday.
Russia can do just fine with an oil price in the range of $60-$65/b, the president said, given that its budget is built on a $40/b price assumption. At the same time, OPEC’s largest producer and de facto leader, Saudi Arabia, which has a less diversified economy, has a budget based on higher oil prices, Putin said.
The International Monetary Fund estimates Saudi Arabia’s fiscal breakeven oil price this year at $85.40/b, with the average for OPEC’s Middle Eastern members at $82.40/b. OPEC and 10 non-OPEC allies led by Russia agreed in December to cut a combined 1.2 million b/d in supplies through June to help drain global oil inventories and bolster prices. But despite strong comments from Falih that he would like to see the cuts extended, the coalition has not yet announced any decision.
With some Russian oil company officials, notably Rosneft CEO Igor Sechin, chafing under the output restraints, Putin was circumspect in tipping his hand on agreeing to an extension. But he said Russia would like to continue cooperation with OPEC on oil market management in some form.
“We have to take into account all the factors: output drop in Iran [and] Venezuela, problems in Libya, Nigeria…and an increase in consumption in the summer season,” Putin said. “I won’t tell you now what considerations we have over what we need to do in the second half of the year, but we will be taking a consolidated decision together with our colleagues in OPEC.” Despite Putin’s noncommittal comments, analysts said the prevailing market conditions point towards a rollover of the production cuts.