Will strengthened Saudi-Russia ties lift oil prices?

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Russia and Saudi Arabia will reportedly sign joint investment agreements worth more than three billion US dollars during King Salman's first visit to Moscow.

The deals will include a 1.1-billion-US-dollar agreement for Russian petrochemical firm Sibur to build a plant in Saudi Arabia and a joint fund that will see 150 million US dollars invested in Russia's private oilfield services firm Eurasia Drilling.

It seems that the world’s two largest oil exporters are putting political differences aside to strengthen ties in the energy sector. Many analysts say that move is driven by their mutual need to lift up the global oil prices.

“The deals will change global oil markets, maybe not for some time, but they definitely reflect a shifting of the global balance,” said Fred Wier, a senior analyst specializing in Russian affairs.

Apart from the deal, Russian firms are also discussing deals with Saudi energy giants.

The Saudi Aramco and Saudi Basic Industries Corporation (SABIC) are expected to sign a memorandum of understanding with Russia’s biggest petrochemical firm Sibur to examine opportunities for building petrochemical plants in the two countries.

Excess supply crushed oil prices from over 100 US dollars to below 55 US dollars a barrel through the second half of 2014. Oil prices have yet to bounce back.

The OPEC meeting is held in Vienna, Austria, on November 30, 2016, when the members reach an output cuts deal for the first time in eight years. /VCG Photo

Saudi Arabia and Russia had tried to support oil prices together last year by cutting oil output by 1.8 million barrels a day. In June 2017, the oil producers agreed to extend those cuts until March 2018.

At the ongoing oil producers’ meeting in Moscow, Russian President Vladimir Putin said that the cuts could be further extended till the end of 2018.

That’s because oil prices still face many uncertainties from the supply side globally. The US Energy Information Administration on Wednesday reported six-million-barrel loss in national reserves but also a 1.98-million-barrel increase in exports.

(Du Zhongyan and Wang Yiqian also contributed to the story.)