Oil-related Developments - June 2018

1) Oil prices: The oil ministers of Saudi Arabia, the UAE and Russia met in St Petersburg on 25 May to review the OPEC and non-OPEC decision to cut production that has been in place for 17 months. This finally brought Brent prices to just over $80/barrel in mid-May following the Trump announcement of US withdrawal from the Iran nuclear agreement. Prices had risen in spite of a record US oil production of 10.3 mbd in February. By 25 May, US rig count had gone to 859, the highest level since March 2015.

According to reports, the ministers discussed a possible increase in production by one mbd. The Russian energy minister Alexander Novak said that the OPEC ministerial in Vienna in June could agree on a gradual easing. These discussions brought an immediate drop in prices: Brent futures fell by 3.4% to $ 76.10, while WTI fell by $ 3.04 to $ 67.67.

2) Saudi foreign reserves surge: Saudi Arabia’s central bank foreign reserves rose last month at their fastest rate for four years. The $13.3 billion month-on-month increase in reserves to $498.9 billion in April is the highest level reached in over year and reveals the extent to which a rebound in oil prices is strengthening the kingdom’s finances. The sharp rise in the reserves in April suggests the government is no longer under major financial pressure, after the Brent oil price climbed to about $75 a barrel last month from around $50 in the middle of last year.

Despite the increase, Saudi Arabia’s government is still running a budget deficit, and the Kingdom would need oil prices to rise to $85-$87 a barrel on the Brent crude index to achieve a balanced budget this year, according to the IMF.


June 4, 2018

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About the Author

Ambassador Talmiz Ahmed

Former Ambassador of India to Saudia Arabia, Oman and UAE, monitors developments in the West Asian region.  

Ambassador Talmiz Ahmad joined the Indian Foreign Service in 1974. Early in his career, he was posted in a number of West Asian countries such as Kuwait, Iraq and Yemen and later, between 1987 and 1990, he was Consul General in Jeddah. He also held positions in the Indian missions in New York, London and Pretoria. He served as Indian Ambassador to Saudi Arabia (2000-03; 2010-11); Oman (2003-04), and the UAE (2007-10). He was also Additional Secretary for International Cooperation in the Ministry of Petroleum and Natural Gas in 2004-06. In July 2011, the Saudi Government conferred on him the King Abdul Aziz Medal First Class for his contribution to the promotion of Indo – Saudi relations. After retirement from the Foreign Service in 2011, he worked in the corporate sector in Dubai for three years. He is now a full-time academic and holds the Ram Sathe Chair for International Studies, Symbiosis International University. He has published three books: Reform in the Arab World: External Influences and Regional Debates (2005), Children of Abraham at War: the Clash of Messianic Militarisms (2010), and The Islamist Challenge in West Asia: Doctrinal and Political Competitions after the Arab Spring (2013). He writes and lectures frequently on Political Islam, the politics and economics of West Asia and the Indian Ocean and energy security issues.