Mar 28, 2018

The future of the Saudi-Russia oil relationship

Saudi Crown Prince Mohammed bin Salman at the United Nations. Photo: Mohammed Elshamy / Anadolu Agency / Getty Images

Saudi Crown Prince Mohammed bin Salman told Reuters that the kingdom and Russia are weighing plans for long-term extension of their cooperation on oil market management. “We are working to shift from a year-to-year agreement to a 10 to 20 year agreement,” the heir to the Saudi throne said.

Why it matters: It's the strongest, highest-level signal yet that the two-year-old pact between OPEC and Russia to limit supplies could be transformed into a lasting agreement between the huge producers, whose market positions have been challenged by the rise of U.S. shale.

The big picture: Talk of transforming the so-called Vienna Group of OPEC and Russia (among other non-OPEC players) into a longer-term alliance has been in the bloodstream for months now.

  • For instance OPEC Secretary General Mohammed Barkindo brought it up repeatedly at a major energy conference in Houston this month. But the Financial Times points out that MBS' comments are the "first time a timeframe has been specified."

The intrigue: Prominent oil analyst Bob McNally told Axios that the comments from MBS raise the stakes of the idea for Russia. “This goes to Putin now,” he said, referring to Russian President Vladimir Putin.

  • “It’s a bit of an open question as to whether Russia will sign up for something as grandiose as a multi-decade cartel,” said McNally, president of the Rapidan Energy Group consultancy.

The bottom line: McNally said the discussion represents an attempt to create long-term market stability:

  • “It is sort of transitioning the Vienna Group from just a reactive, ad-hoc cartel that came together in fear after a bust to $26 per barrel [in early 2016] and transition it to a permanent, pro-active swing producer that can attempt to stabilize prices over decades. That means preventing booms as well as busts."
  • But as McNally noted on Twitter yesterday, the jury is still out on whether this would work.

Between the lines: Amy Myers Jaffe of the Council on Foreign Relations said the discussion could signal that the Saudis and Russians are hedging in case global oil demand peaks sooner than they have publicly acknowledged is likely.

  • “The only reason anyone would need a decade-length agreement is if they believed in peak oil demand,” said Jaffe, who leads CFR's energy security and climate program.
  • Otherwise, it would make more sense to just continue with one- or two-year deals, but a multi-decade plan “means the agreement is going cover investment policy, not just production policy," she notes.

To be sure: OPEC and Saudi Aramco have publicly batted aside the view that a demand peak is beginning to appear on the horizon and could even arrive as soon as the late 2020s, arguing the world's oil thirst will keep rising for decades. OPEC's forecast shows demand rising through at least 2040.

Go deeper

In photos: Americans venture out for Memorial Day weekend

Venice Beach in Los Angeles on May 24. Photo: David McNew/Getty Images

Authorities warned Americans to take precautions against the coronavirus amid reports of packed beaches during the Memorial Day weekend, some three months after the pandemic began spreading across the U.S.

The big picture: Law enforcement stepped up beach patrols, authorities on Florida's Gulf Coast closed parking lots because they were full and there were crowded scenes at Lake of the Ozarks bars in Missouri, per AP, which reports a shooting injured several people at a packed Daytona Beach in Florida.

Coronavirus dashboard

Illustration: Aïda Amer/Axios

  1. Global: Total confirmed cases as of 9:30 p.m. ET: 5,405,029 — Total deaths: 344,997 — Total recoveries — 2,168,408Map.
  2. U.S.: Total confirmed cases as of 9:30 p.m. ET: 1,642,021 — Total deaths: 97,698 — Total recoveries: 366,736 — Total tested: 14,163,195Map.
  3. World: White House announces travel restrictions on Brazil, coronavirus hotspot in Southern Hemisphere Over 100 coronavirus cases in Germany tied to single day of church services — Boris Johnson backs top aide amid reports that he broke U.K. lockdown while exhibiting symptoms.
  4. Public health: Officials are urging Americans to wear masks headed into Memorial Day weekend Report finds "little evidence" coronavirus under control in most statesHurricanes, wildfires, the flu could strain COVID-19 response
  5. Economy: White House economic adviser Kevin Hassett says it's possible the unemployment rate could still be in double digits by November's election — Public employees brace for layoffs.
  6. Federal government: Trump attacks a Columbia University study that suggests earlier lockdown could have saved 36,000 American lives.
  7. What should I do? Hydroxychloroquine questions answeredTraveling, asthma, dishes, disinfectants and being contagiousMasks, lending books and self-isolatingExercise, laundry, what counts as soap — Pets, moving and personal healthAnswers about the virus from Axios expertsWhat to know about social distancingHow to minimize your risk.
  8. Other resources: CDC on how to avoid the virus, what to do if you get it, the right mask to wear.

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Updated 47 mins ago - Politics & Policy

Republicans sue California over mail-out ballot plan

California Gov. Gavin Newsom during a February news conference in Sacramento, California. Photo: Justin Sullivan/Getty Images

President Trump accused Democrats of trying "Rig" November's general election as Republican groups filed a lawsuit against California Sunday in an attempt to stop Gov. Gavin Newsom (D) from mailing ballots to all registered voters.

Driving the news: Newsom signed an executive order this month in response to the coronavirus pandemic ensuring that all registered voters in the state receive a mail-in ballot.