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Russian-Saudi Energy Cooperation Could Spell Trouble For OPEC

Al-Hayat, London, March 10 

A recent report by the International Energy Agency raises deep uncertainties over the future of the global energy market. The surplus of international oil, which has caused a dramatic plunge in its price, has pushed both OPEC and non-OPEC countries to reduce their exports in recent years. In a desperate effort to block falling prices, Russia and Saudi Arabia recently signed a comprehensive energy agreement limiting the two countries’ respective oil outputs until the end of 2018. However, just as the agreement was signed, a new and unexpected player emerged in the global energy market: namely, the United States. Today, the U.S., with its output of roughly 10 million barrels per day, has surpassed the oil production of the Saudis and is closing the gap on Russia. According to several energy experts, it is now possible that the U.S., together with Canada and Brazil, could satisfy the vast majority of the global demand for oil. This new reality may very well push oil-producing countries to expand their artificial limit on oil exports in order to manipulate the price of oil. Moreover, Russia and Saudi Arabia are increasingly at odds over Iran, which could bring an end to their partnership in the future. Signing a deal with Saudi Arabia has allowed Russia to strengthen its hand in the Gulf, while diminishing the role played by the U.S. in the region. However, Russia has also supported Iran and the government of Bashar al-Assad, much to the dismay of Riyadh. It seems as if the countries are now wedded to each other, working together to block declining oil prices even while continuing to defy each other in the diplomatic arena. Such uncertainties can most definitely effect the future prices of oil. For the time being, it remains unclear whether these changes will empower OPEC, or rather lead to its demise. – Randa Takya al-Din