Russia and Saudi Arabia are at odds after a flood of Russian oil supply pushed the commodity’s price below a key break-even level needed to fund Saudi projects
Saudi Arabia is growing annoyed with Russia as Moscow continues to pump cheap crude oil into the market.
The increased supply of oil from Russia is helping push oil prices below levels Saudi Arabia needs to fund its megaprojects.
Saudi Arabia’s massive budget needs oil prices to be above $81 per barrel, according to The Wall Street Journal.
Russia’s pumping of cheap oil into the market is helping put downward pressure on prices for the commodity, and Saudi Arabia isn’t happy as oil prices stay below a key break-even level, according to a report from The Wall Street Journal.
The report found that Saudi Arabia’s efforts to curtail production and push oil prices higher earlier this year have been undermined by Moscow’s flood of cheap oil supply, and that the oil-rich nation has expressed its anger at Russia for not following through on its pledge to throttle production, the report said, citing people familiar with the matter.
“Saudi officials have complained to senior Russian officials and asked them to respect the agreed cuts,” the report said.
Members of OPEC+ said in early April that they would reduce oil output to help prop up oil prices. But recent data suggests Russia isn’t following through on its side of the deal as it seeks to generate revenue to help fund its struggling economy and war effort.
Oil prices have been in a solid downtrend since they peaked in March 2022, right after Russia invaded Ukraine, which set off a slew of supply-chain related problems and helped push oil prices above $120 per barrel. WTI Crude oil fell 4% on Tuesday to just under $70 per barrel, while Brent Crude oil fell 4% to $74.07 per barrel.
Saudi Arabia needs oil above a key break-even level of $81 per barrel to help fund its massive budget of so-called gigaprojects, which include a 110-mile long city in the desert called “The Line” and a resort in the Red Sea that’s the size of Belgium.
Economic advisors have privately warned Saudi senior policy makers that the kingdom needs higher oil prices for the next five years in order to keep funding billions of dollars of projects, according to the report. That’s in part because the projects have failed to attract a lot of investment from abroad.
Saudi Arabia will have another chance to convince Russia to implement oil production cuts at an upcoming OPEC+ meeting in early June.
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