FAYEZ NURELDINE | AFP | Getty Images
- Crude futures have been slowly rising after Russia and Saudi Arabia agreed to cut oil supply.
- Saudi producers appear to be doing more to meet supply commitments than Russian counterparts.
- Riyadh's oil deal with Moscow is now 'more fragile than ever,' analyst says
A rolling oil pact between Russia and Saudi Arabia which seeks to support prices by reducing output looks to be on shaky ground with only the Arab nation appearing to fulfil its promises.
Late last year, OPEC producing countries, and non-OPEC producers, led by Russia, agreed to cut supply by 1.2 million barrels per day(bpd), an arrangement known as OPEC+.
Saudi Arabia agreed to account for the bulk of OPEC nation cuts and has confirmed it will drop its crude oil production by a further 400,000 barrels per day to 9.8 million b/d in March. If achieved it would mean that since the December, Saudi Arabia has become responsible for 70 percent of the total OPEC+ target.
In turn, Russia was set to account for the greater share of non-OPEC cuts, but from October to the beginning of February had only decreased output by 47,000 barrels per day.
The slow pace to cuts from Russian oil producers drew criticism from Saudi Arabia's Energy Minister Khalid al-Falih, who told CNBC in January that Moscow had moved "slower than I'd like."
That barb led to a response from Russian Energy Minister Alexander Novak who said at the beginning of February that Russia was "completely fulfilling its obligations in line with earlier announced plans to gradually cut production by May this year."
During 2018, oil prices were dragged lower by increasing U.S. shale supply and fears over global demand. President Donald Trump has repeatedly criticized OPEC on its decision making, claiming prices should be lower.
In November 2018 Trump tweeted that he hoped OPEC wouldnot cut oil output.
On Tuesday International benchmark Brent crude was trading at $66.39 a barrel at around 12 p.m. London time (7 a.m ET), down around 0.1 percent, while West Texas Intermediate (WTI) stood at $56.09, almost 1 percent higher.
Oil prices have steadily edged higher since the OPEC+ promise to cut supply and are now sitting at levels not seen since November 2018.
But Torbjorn Soltvedt, principal MENA politics analyst at Verisk Maplecroft, said in a note Tuesday that any end to Russian-Saudi coordination would likely add significant downward pressure on prices.
"Although our base case is still that Riyadh and Moscow find a compromise to extend the agreement, the pact is now looking more fragile than ever," said Soltvedt.
The political analyst added that to save the pact he expected Saudi Arabia may even have to settle for "low levels of (Russian) compliance to save the pact."
Verisk Maplecroft estimate that Riyadh needs $80 a barrel in order to fund its 2019 budget while in turn, Russian President Vladimir Putin has claimed that $60 is enough to satisfy Moscow's needs.
The next meeting of OPEC and non-OPEC oil producers takes place in mid-April.