oil  pumpjacks
Pumpjacks work in a field near Lovington, N.M. Oil supply from the United States, Russia and other countries outside of OPEC is expected to drop sharply next year, possibly the steepest decline since the Soviet Union collapsed because of low prices, the International Energy Agency forecast. Image Credit: AP

Following a heated process of give-and-take, Opec members and non-Opec oil producing countries (Opec+) finally agreed to extend the output cut — of 1.2 million barrels a day — for a further nine months. This came about despite disparities in the positions taken by oil producing countries at the last Opec meeting held in Vienna in early July.

It is a fact that an agreement had already been approved at the preceding G20 Summit in Osaka, Japan, last month, after Saudi Crown Prince Mohammad Bin Salman met Russian President Vladimir Putin. In addition, Alexander Novak, Russia’s Minister of Energy, said: “The agreement between Russia and Saudi Arabia to continue oil cuts shows both countries’ commitment to the stability of the global oil market”.

The Gulf-backed Saudi-Russian coordination has been a crucial factor in identifying trends within the global oil market, including, of course, prices. The speculations ahead of giving the green light for the agreement had forecast a possible price collapse if the agreement was broken, which would result in huge losses and economic difficulties for oil exporting countries.

However, prolonging the agreement means stability for oil producing and consuming countries and maintaining fair prices at between $60-$70 per barrel, which is another stabilising factor for the global economy.

This bilateral cooperation between Saudi Arabia and Russia warded off possible consequences resulting from the almost complete halt to Iran’s oil exports. The mullahs’ government was counting on the failure of US sanctions against Iran and oil prices to exceed $100 a barrel after sanctions were imposed. Saudi Arabia and Russia, thanks to their surplus production capacity, bridged the gap and maintained the stability of markets and prices.

However, after the Saudi-Russian deal came to light even before the G20 summit, oil tankers were attacked near the Fujairah port, in addition to acts of sabotage on Saudi oil pipelines. This was a desperate attempt to spook the markets and raise oil prices to above $100, which would have exerted pressure on the US administration even as it seeks to keep prices at low levels.

It seems that Iran’s understanding of oil market developments is wrong, as is its understanding of geopolitical developments, by which successive mistakes have led to heavy losses for itself. Opec alone no longer determines market trends, and non-Opec producing countries are playing a major role that cannot be ignored and without which oil exporting countries’ interests would be difficult to maintain.

Accordingly, Opec’s meetings are held in coordination with other oil producing countries, and global markets await the outcomes from the meetings of the new bloc — Opec+ — and which includes other major producing countries. In fact, Opec+ plays a vital role in enforcing decisions prepared in meetings between Saudi Arabia and Russia.

Therefore, all attempts by Tehran to raise prices through acts of sabotage will yield to nothing, especially as it has fallen outside of the oil-exporting countries group. In addition, the Saudi-Russian coordination will be able to contain Iranian attempts and preserve the interests of all oil exporting countries in the Opec+ group.

The recent meeting clearly indicates that stability of oil markets and prices is almost guaranteed by the cooperation of Opec+ countries.