Saudi Arabia’s move to maintain its share of the global oil market and expand in Europe will backfire, said the chief executive officer of Russia’s largest oil producer.
“The strategy that Saudi Arabia has chosen doesn’t bring any significant victories,” Igor Sechin, CEO of OAO Rosneft, said Thursday at the Eurasian Forum in Verona, Italy. “More likely the opposite.”
After the US cut imports amid a boom in domestic production, exporters from the Middle East are increasing output and seeking new markets, a move that isn’t helpful for the global industry, Sechin said.
After oil prices slumped amid a global surplus, Middle Eastern governments have to use “billions of dollars” from sovereign funds, raise large external loans or cut spending on new cars and furniture to make up the shortfall in revenues, he said.
Saudi Arabia led the Organization of Petroleum Exporting Countries in a decision last year to defend market share rather than cut output in response to a global production glut. The subsequent price slump tipped Russia into recession and curbed government revenue, about half of which comes from oil and gas. Saudi Arabia also faces a budget squeeze and has moved to curb spending.
Officials from the two nations met in Vienna Wednesday as part of technical talks between OPEC and oil producers outside the group. The attendees did not discuss restrictions on crude output or setting a target range for prices, Ilya Galkin, the Russian Energy Ministry’s head of international relations, told reporters after the meeting. Russia vies with Saudi Arabia and the US for the title of world’s largest oil producer.
Poland’s top refiner PKN Orlen SA will take delivery of its first crude from Saudi Arabia next month, a shipment that could mark the start of new trade relationship undermining the traditional dominance of Russian supplies, CEO Jacek Krawiec said at a conference in Warsaw Thursday.
Sechin questioned Saudi Arabia’s expansion into a market dominated by Russian crude and cast doubt on the reliability of its supplies.
“The question arises to what extent these supplies can be long-term and reliable,” Sechin said. “The point being that Middle Eastern oil sent to Europe doesn’t have any logistical advantage when compared with supplies to the Asia-Pacific Region.”
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