Riyadh warned about a new wave of price war
Saudi Arabia sent a demand to the rest of the OPEC members to pay compensation for the unfulfilled norms to reduce the level of daily extracted raw materials. Otherwise, Riyadh is ready to unleash another price war, Forbes reports, citing The Wall Street Journal.
It is known that Energy Minister Prince Abdulaziz bin Salman sent an appeal to OPEC members, especially Angola and Nigeria, demanding to further reduce the extraction of raw materials, as they violated the agreement. Representatives from both countries replied that they couldn’t meet the requirements. As a result of the conversation, the minister said that Riyadh is ready to sell oil at a lower cost.
India and China are the main sales markets for Angola and Nigeria, as they are the easiest to enter. If another war is unleashed on the territory of the PRC, it will be quite difficult to stop it. At the same time, new disputes may once again collapse world prices for raw materials.
Pressure from Saudi Arabia could turn into another dispute in OPEC. The world still remembers how Russia and Riyadh couldn’t agree on the reduction, and as a result the cost of raw materials fell sharply. It has been impossible to recover them till this day. As a result, the parties were forced to come to the tough conditions with serious restrictions until July 6, and later they were extended until August.
Despite the agreements signed, there are still tension inside the conglomerate. For example, Angola’s oil minister, Diamantino Acevedo, avoids talking to the Saudi minister and has also refused to attend the June 18 meeting. When Acevedo was replaced by his adviser, Abdulaziz said that he couldn’t attend the meeting. Considering that Angola will lead OPEC (the leader changes annually) from 2021, the situation is aggravated every day. In parallel with this, the Minister of Saudi Arabia is trying to influence the Minister of Angola through his brother Mohammed bin Salman, who called the President of Nigeria to influence the situation.
The deal between Russia and OPEC, concluded in April, was the most serious in terms of production cuts. The parties decided to reduce production by 9.7 million barrels per day during May-June, by 7.7 million in the second half of the year and by 5.8 million by the end of 2022. Russia agreed to cut production by 19% to 8.5 million barrels per day. At the first OPEC+ meeting, it was planned to reduce the level of raw materials production to 9 million barrels.