Saudi Arabia's oil move threatens Russia's budget amid tensions
Saudi Arabia is preparing to impact Russia's budget by announcing an increase in oil production. This move will likely lead to a drop in oil prices, an important element of the Russian budget.
4:56 PM EDT, September 30, 2024
Saudi Arabia plans to abandon its price target for oil, previously set at $100 per barrel, in preparation for increased production.
The Kingdom plans to raise production starting in December and is ready to lower oil prices.
According to the announcement, it will increase the average daily production by 83,000 barrels per month. Starting in December 2025, production will increase by 1 million barrels. Currently, the kingdom produces 8.9 million barrels per day.
A blow to Russia's budget
For Russia, this means a decrease in revenues at a time when war expenditures outlined in the 2025 budget are set to be increased by another 22%, according to "The Moscow Times".
The Saudi announcement marks the end of an informal pact between Riyadh and Moscow that lasted for over a year. The pact involved limiting production within the OPEC+ format, consequently driving up raw material prices.
Concerning agreement
This agreement worried the West, which supports Ukraine, attacked by Russia in 2022. The close relationship between the heir to the Wahhabi kingdom's throne, Prince Mohammed bin Salman, and Vladimir Putin, and Riyadh's pivot towards Moscow is troubling, given that Riyadh had been a close collaborator with Washington.
Moscow and Riyadh were brought closer by the US expansion in the energy market, especially in the production of shale gas and oil. Recall that it was this convergence of oil interests that resulted in the expansion of the oil cartel and the formation of OPEC+ in 2016.
Now, the Kingdom's interests have prevailed. If the Saudis indeed increase production, Brent oil prices in 2025 could fall below $60 per barrel.
