Saudi Arabia is growing increasingly annoyed with Russia as Moscow continues to pump cheap crude oil into the market.
The increased supply of oil from Russia is helping to drive oil prices below the levels Saudi Arabia needs to fund its megaprojects.
Saudi Arabia’s massive budget requires oil prices to be above $81 a barrel, according to the Wall Street Journal.
Russia’s pumping of cheap oil into the market is helping to put downward pressure on commodity prices, and Saudi Arabia is unhappy as oil prices remain below a threshold of key profitability, according to a Wall Street Journal report.
The report found that Saudi Arabia’s efforts to cut production and drive up oil prices earlier this year were undermined by cheap oil supplies from Moscow, and the oil-rich nation expressed its anger at Russia for not delivering on its accelerator production promise, the report said, citing people familiar with the matter.
“Saudi officials have complained to senior Russian officials and asked them to stick to the agreed cuts,” the report said.
OPEC+ members said in early April they would cut oil production to help support oil prices. But recent data suggests Russia is not living up to its end of the deal as it seeks to generate revenue to help fund its struggling economy and war effort.
Oil prices have been on a solid downward trend since peaking in March 2022, just after Russia invaded Ukraine, triggering a series of supply chain issues and helped push oil prices above $120 a barrel. WTI crude oil fell 4% on Tuesday to just under $70 a barrel, while Brent crude oil fell 4% to $74.07 a barrel.
Saudi Arabia needs oil above a key breakeven point of $81 a barrel to help fund its massive budget of so-called gigaprojects, which include a 110-mile-long city in the desert. called “The Line” and a Red Sea resort it’s the size of Belgium.
Economic advisers have privately warned senior Saudi politicians that the kingdom needs higher oil prices over the next five years to keep funding billions of dollars worth of projects, the report said. This is partly because the projects have failed to attract much foreign investment.
Saudi Arabia will have another chance to convince Russia to implement oil production cuts at an upcoming OPEC+ meeting in early June.
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