London — Saudi Arabia and Russia had to reach a difficult compromise on OPEC+ policies on Saturday as Riyadh pushed to accelerate oil output increases while Moscow argued for a pause, four OPEC+ sources with knowledge of the talks said.
Tension between the two most powerful OPEC+ members is simmering after a few years of smooth cooperation. The last time Moscow and Riyadh clashed on policy was in 2020 when all OPEC+ members pumped at will and oil prices crashed.
On Saturday, eight key OPEC+ members agreed to raise production by 411,000 barrels per day from July, after agreeing the same-sized increases in output in May and June. The group is unwinding voluntary cuts put in place over the past 5 years to support the market.
But unlike policy debates in the previous two months, Saturday’s decision was more complex, the four people familiar with the discussions said.
Before the Saturday meeting, Saudi Arabia lobbied OPEC+ to increase output by more than 411,000 bpd. Riyadh wanted to accelerate the increases because several members such as Kazakhstan and Iraq have failed to stick to their OPEC+ quotas and overproduced this year, two of the four sources said.
During the meeting, Russia as well as fellow OPEC+ members Oman and Algeria advocated for a pause in production hikes as they argued that demand might not be strong enough to consume the additional supply, the four sources said.
The two sides compromised with the deal to hike 411,000 bpd, the sources said.
All sources declined to be identified due to the sensitivity of the matter.
Saudi Arabia’s energy ministry, the office of Russian Deputy Prime Minister Alexander Novak and OPEC did not respond to requests for comment.
In a statement on Saturday, OPEC+ cited healthy oil market fundamentals and low oil inventories as the reasons for the latest production increase.
OPEC+ has agreed to increase output by 1.37 million bpd to date this year.
The group still has nearly 4.5 million bpd of output cuts in place agreed over the past five years to support the market and amounting to some 4.5% of global demand, according to Reuters calculations.
Some cuts were agreed based on production levels dating back to 2022 and some producers may have lost capacity and might be unable to boost output quickly due to lack of investment in recent years.
Saudi Arabia has the biggest spare capacity among OPEC+ members and can move quickly to boost output and capture market share.
Russia meanwhile has seen its spare capacity shrinking due to lower investments. Moscow would also struggle to quickly sell extra barrels to refiners due to Western sanctions over its invasion of Ukraine.
OPEC+ pumps about half of the world’s oil and includes OPEC members and allies, such as Russia.
On Monday, oil prices rose 3% to above $65 a barrel with traders citing a relief rally as OPEC+ kept its July output increase the same as in the previous two months.
Reporting by Alex Lawler, Ahmad Ghaddar, Dmitry Zhdannikov and Maha El Dahan; Editing by Simon Webb, Jason Neely and Tomasz Janowski – Reuters
