Back to the complete issue
Sunday, 27 May 2018

Are Saudi Arabia, Russia going to turn on the oil tap this year?

Is the oil production tap about to be turned on? With oil still in the USD 80 neighborhood, Saudi Arabia and Russia are signaling that they may dial-up oil output this year. Saudi Energy Minister Khalid Al Falih said that it is likely production will ramp up in 2H2018, according to Bloomberg. Whether the size of the supply increase is ultimately “a mn, more, or less, we’ll have to wait until June,” when OPEC and its partners will meet, Al Falih said. “We’re not interested in an endless rise in the price of energy and oil,” Russian President Vladimir Putin told reporters. Oil prices at USD 60/bbl fully suit Russia and the country doesn’t want them to spiral higher, he added. Russian Energy Minister Alexander Novak said the output boost would start in the third quarter.

The comments had an immediate impact on Friday, sending Brent crude down USD 3 to below USD 67 and vindicating investors who have reduced their oil positions.

Is the US exerting behind the scenes pressure to curb prices? Analysts are suggesting a tweet by Donald Trump from last month lambasting OPEC for raising prices may have helped nudge the Saudis to switch gears on oil. The US wasn’t the only one, with India also pressuring the Saudis to start ramping up production, Bloomberg says.

A drop in oil prices would be good news for the 2018-19 state budget here at home. Every USD 1 increase in the price of a barrel of oil raises government energy spending in the coming budget by EGP 3-4 bn, we’re told. The government had budgeted EGP 110 bn for energy subsidy spending at an average oil price of USD 55/bbl

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.