Saudi-Russian Scenario to Extend OPEC Agreement till End of 2018

Saudi Arabian Energy Minister Khalid al-Falih attends a meeting of the 4th OPEC-Non-OPEC Ministerial Monitoring Committee in St. Petersburg, Russia July 24, 2017. Reuters
Saudi Arabian Energy Minister Khalid al-Falih attends a meeting of the 4th OPEC-Non-OPEC Ministerial Monitoring Committee in St. Petersburg, Russia July 24, 2017. Reuters
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Saudi-Russian Scenario to Extend OPEC Agreement till End of 2018

Saudi Arabian Energy Minister Khalid al-Falih attends a meeting of the 4th OPEC-Non-OPEC Ministerial Monitoring Committee in St. Petersburg, Russia July 24, 2017. Reuters
Saudi Arabian Energy Minister Khalid al-Falih attends a meeting of the 4th OPEC-Non-OPEC Ministerial Monitoring Committee in St. Petersburg, Russia July 24, 2017. Reuters

Russia and Saudi Arabia’s remarks Thursday have revived oil markets and hopes of another year of trying to rebalance the oil market after the Kingdom showed its support for the Russian proposal to extend the current global agreement between oil-producers until the end of 2018.

Oil rose above $56 a barrel on Thursday, supported by expectations Saudi Arabia and non-OPEC member Russia would extend the curbs, but prices are still half their mid-2014 levels.

Saudi Energy Minister Khalid al-Falih was speaking in a television interview a day after Russian President Vladimir Putin said the supply reduction deal that is due to expire in March could run to the end of next year.

“In the kingdom, we have to keep all options open, President Putin agreed with us on this and expressed his readiness to extend until the end of 2018 if this is agreed, and if this is the best option,” Falih told Al Arabiya television.

Saudi Arabia and Russia helped secure a deal between the Organization of the Petroleum Exporting Countries (OPEC) and 10 rival suppliers to cut output until the end of March 2018 in an effort to reduce a glut.

Falih said he welcomed the “flexibility” shown by Russia on the issue and added the Saudi government aimed to “be flexible in leading the producing countries in and outside of OPEC to a consensus that takes the market to where we want it to be.”

Bloomberg quoted last month sources as saying that OPEC and non-OPEC producers and countries are studying the extension of the agreement for at least three months, and it is expected to extend for six months or until the end of the year.

Falih, who is also Aramco’s chairman, said on Thursday that the IPO would happen in the second half of 2018, adding that the listing would be used as a “catalyst” for opening up the Saudi economy.

“Work is ongoing to list Saudi Aramco in 2018,” Aramco’s Chief Executive Amin Nasser said at an energy forum in Moscow.

We will be looking at evaluating investors as we continue to make progress related to timing and location.”

Nasser said the Saudi government would decide on the listing venue and that there were no current talks with Russian companies on them taking part in the IPO.

The plan to float around 5 percent of Aramco in an initial public offering (IPO) is a centerpiece of Vision 2030, a wide-ranging reform plan to diversify the Saudi economy beyond oil which is being championed by Saudi Crown Prince Mohammed bin Salman.

The Saudi Crown Prince said that the IPO, which could be the world’s biggest, will value Aramco at a minimum of $2 trillion and could raise as much as $100 billion.

When talking about Shale oil, Falih said inventories were still falling despite the fact that climbing US shale production has kept a lid on price gains.

“Shale coming in and happening again in 2018 doesn’t bother me at all. The market can absorb it,” Falih said, speaking alongside Russian Energy Minister Alexander Novak on a panel at an energy forum in Moscow.

“We have seen a steady reduction in inventories. We see as we enter the fourth quarter that supply is less than demand and inventories are declining around the world,” Falih said.

Novak said he was satisfied with oil prices and Moscow would welcome other producers joining the deal to curb output.



Saudi Non-Oil Exports Hit Two-Year High

The King Abdulaziz Port in Dammam, eastern Saudi Arabia. (“Mawani” port authority)
The King Abdulaziz Port in Dammam, eastern Saudi Arabia. (“Mawani” port authority)
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Saudi Non-Oil Exports Hit Two-Year High

The King Abdulaziz Port in Dammam, eastern Saudi Arabia. (“Mawani” port authority)
The King Abdulaziz Port in Dammam, eastern Saudi Arabia. (“Mawani” port authority)

Saudi Arabia’s non-oil exports soared to a two-year high in May, reaching SAR 28.89 billion (USD 7.70 billion), marking an 8.2% year-on-year increase compared to May 2023.

On a monthly basis, non-oil exports surged by 26.93% from April.

This growth contributed to Saudi Arabia’s trade surplus, which recorded a year-on-year increase of 12.8%, reaching SAR 34.5 billion (USD 9.1 billion) in May, following 18 months of decline.

The enhancement of the non-oil private sector remains a key focus for Saudi Arabia as it continues its efforts to diversify its economy and reduce reliance on oil revenues.

In 2023, non-oil activities in Saudi Arabia contributed 50% to the country’s real GDP, the highest level ever recorded, according to the Ministry of Economy and Planning’s analysis of data from the General Authority for Statistics.

Saudi Finance Minister Mohammed Al-Jadaan emphasized at the “Future Investment Initiative” in October that the Kingdom is now prioritizing the development of the non-oil sector over GDP figures, in line with its Vision 2030 economic diversification plan.

A report by Moody’s highlighted Saudi Arabia’s extensive efforts to transform its economic structure, reduce dependency on oil, and boost non-oil sectors such as industry, tourism, and real estate.

The Saudi General Authority for Statistics’ monthly report on international trade noted a 5.8% growth in merchandise exports in May compared to the same period last year, driven by a 4.9% increase in oil exports, which totaled SAR 75.9 billion in May 2024.

The change reflects movements in global oil prices, while production levels remained steady at under 9 million barrels per day since the OPEC+ alliance began a voluntary reduction in crude supply to maintain prices. Production is set to gradually increase starting in early October.

On a monthly basis, merchandise exports rose by 3.3% from April to May, supported by a 26.9% increase in non-oil exports. This rise was bolstered by a surge in re-exports, which reached SAR 10.2 billion, the highest level for this category since 2017.

The share of oil exports in total exports declined to 72.4% in May from 73% in the same month last year.

Moreover, the value of re-exported goods increased by 33.9% during the same period.