Backed by the OPEC countries, Riyadh has ensured that production targets for February are not raised. Isolated, Russia had to bow to Saudi Arabia's will.

Oil prices jumped on Tuesday, after hesitating amid tensions between Saudi Arabia and Russia over the level of crude production to be reached in February. The Organization of Petroleum Exporting Countries and its partners (Opep+), including Russia, will maintain the production cuts decided last year after the collapse in fuel demand during the pandemic

In detail, Brent, the European benchmark, gained 4.9% to more than 53 dollars, while WTI, the American benchmark, jumped more than 5% to rise above the $50 mark.

Unilateral cut

The coalition decided in extremis to marginally increase its production in February and March, with the volume voluntarily withdrawn from the market rising from 7.2 million barrels per day (mbd) to 7.125. But Saudi Arabia, for its part, will carry out an additional unilateral reduction of 1 million b/d, which will largely offset the increase of 75,000 b/d for Russia

The meeting of ministers of the alliance, which represents half of global production, got off to a bad start. The discussions, which were supposed to lead to an agreement on Monday, were suspended and postponed to the following day due to the unanimous opposition of OPEC members to the Russian proposal to reinject 500,000 barrels

Riyadh is playing it safe

OPEC, led by Saudi Arabia, did not want to increase production, but maintain the current cuts, or even reduce them further to support prices strained by the pandemic. Demand for black gold fell by almost 10% over the year

“At the risk of being disgusting, I urge you to be careful. The new variant of the virus is an unpredictable and worrying event,” Prince Abdulaziz bin Salman warned in his opening speech at this meeting via videoconference

In the United Kingdom, where the variant was first detected, the health situation is deteriorating at high speed, to the point that Prime Minister Boris Johnson has announced a third lockdown. Investors fear that Europe will also fall victim to a third wave, which will weigh on fuel consumption

Market shares versus prices

On the contrary, Moscow wanted to continue the strategy adopted in December of increasing production by 500,000 barrels per day every month. “Russia is currently interested in market shares, while a number of other countries are giving preference to market prices,” summarised Iranian Oil Minister Bijan Namdar

For Moscow, which can be satisfied with a barrel to 50 dollars, it is mainly a question of maintaining pressure on the American shale oil sector, whose production costs are higher, and Saudi Arabia does not want to see production recover across the Atlantic either. But Riyadh needs more expensive oil to finance its public spending

Isolated Russia

Isolated, Russia had to bow to the common front of OPEC, with several OPEC countries showing their support for Riyadh. From a personal point of view, it is also a victory for Prince Abdulaziz bin Salman, who was forced in December to agree to an increase in production for January

Moreover, the prices are also taking advantage of the Iranian intention to continue enriching uranium. The probability that under these conditions, the United States will lift sanctions against oil exports from the Islamic Republic, even with the arrival of Democrat Joe Biden, is low