Saudi Arabia and Russia are on a collision course. On Friday the International Energy Agency will publish its first forecast of oil market balances in 2020. The headline figures will probably show stockpiles rising next year if the OPEC+ producer group doesn’t extend output cuts into a fourth year.
But their pain may not end there. Growing signs that demand growth is turning out to be much weaker than expected may require producers to make even deeper cuts. If so, that could spell the end of the partnership between Saudi Arabia and Russia on oil policy.
The production restraint agreed in November and December 2016 by OPEC and a group of supporting countries—Russia was the only one that offered a substantial voluntary reduction—was meant to drain excessive inventories and bring global supply and demand into balance during the first six months of 2017.
