On June 14, the meeting of Saudi Crown Prince Mohammed bin Salman and Russian President Vladimir Putin as well as the talks between their energy ministers, Khalid al-Falih and Alexander Novak, brought important results. On the one hand, Moscow and Riyadh seemed to finalize their joint position regarding the future of the Vienna agreement, in which OPEC countries agreed to reduce their production of oil. On the other hand, Russia and Saudi Arabia declared their readiness to form a coalition that would be determining the future of the global oil and gas market. This is a serious declaration, as the two countries still have a lot of differences they need to overcome.

Recent Russian-Saudi negotiations left no doubts that there will definitely be an increase in the oil output of OPEC plus (a group of OPEC and non-OPEC members that in 2016 agreed to limit their oil production in order to stabilize the global oil market). Moscow and Riyadh agreed on this and see the revision of oil production quotas as inevitable. However, it is not clear whether Novak and Falih agreed on the exact volume of production increase they will be offering to other members of OPEC plus at their meeting in late June. Yet it seems that the Saudis gave the green light to Moscow to suggest a higher increase volume than was initially expected. After his consultations with Falih, Novak said Russia might go for an increase of 1.5 million barrels per day (bpd) instead of the initially suggested 1 million bpd. This move is completely in Russian interests.

On the one hand, the increase of 1.5 million bpd might be enough to compensate for the drop in Venezuela’s and Iran’s oil output as well as the volatility of oil production in Libya, Nigeria and Iraq. Russia and Saudi Arabia are extremely concerned that the fall of oil output in these countries, as well as unexpected oil production disruption in other parts of the world, might skyrocket prices and destabilize the market. Thus, in June, Igor Sechin, the head of Russian energy company Rosneft, predicted new oil price hikes caused by US sanctions on Iran. As opposed to the mid-2000s, when Russian energy corporations were blindly pushing for higher oil prices, now Moscow is much more concerned about the stability of reasonably high oil prices rather than their constant growth that might encourage growth of oil output by rivals, boost development of alternative energy resources and, in the end, shrink demand.

On the other hand, Russia’s intention to increase the oil output of the OPEC-plus group to 1.5 million bpd is in line with the statements by some Russian market analysts interviewed by Al-Monitor. They said that to keep oil prices in the corridor of $65-$75 per barrel, which is most desired by Russia, the increase in oil production by 1 million bpd might not be enough.