Saudi Oil Minister: OPEC-Russia Deal Added $25 to Oil Price

The OPEC + agreement on the reduction of oil production added at least $25 to the current price of oil, Saudi Energy Minister Khalid al-Falih said on the sidelines of the World Economic Forum in Davos.

“My opinion that current price has a least 25 dollars of the current price is a result of the deal. And most of that amount goes to the governments, not to the companies,” the minister said, responding to a question about the revenues of OPEC + countries in 2017, Oil Price reported.

According to the International Energy Agency (IEA), additional revenues to the budget of Saudi Arabia as a result of this transaction in 2017 amounted to $100 million per day, to the Russian budget – $117 million.

Earlier, the Saudi minister, Russia’s Energy Minister Alexander Novak and U.S. Energy Secretary Rick Perry spoke at the main energy session in Davos. Novak and al-Falih said that the growth in the production of shale oil in the U.S. does not threaten the market.

The U.S. minister agreed with this saying that the demand will absorb the growth in production. He also stressed that Russia and the United States can cooperate in energy, despite the sanctions regime.

IEA expects explosive growth in the production of shale oil in the US by 260,000 barrels per day, up to 10.4 million barrels per day, which is a record indicator since 1970. Thus, production in the U.S. may exceed production in Saudi Arabia and reach the level of production in Russia.

OPEC member-states and non-OPEC oil producing countries reached an agreement on the reduction of oil production (the OPEC+ agreement) in late 2016. The agreement obliges the parties to cut production by a total of 1.8 million barrels per day in comparison with the level of October 2016. Under the agreement, Saudi Arabia and Russia have the biggest cutbacks, which are 486,000 barrels per day and 300,000 barrels per day, respectively.

The deal was initially valid in the first half of 2017 but since then it has been extended twice: first – until the end of March 2018, and later – until the end of 2018. The goal is to remove surplus world oil reserves from the global market.