Russia keeps Saudis at arm’s length, as oil price fall continues

MOSCOW (Bloomberg) - Russia, the world’s largest energy exporter, said the current oil-price slump was expected and it doesn’t plan talks with Saudi Arabia for the time being.

The decision to keep the Saudis at arm’s length comes as oil tumbles to a four-year low, continuing its slide after the collapse of OPEC+ talks this month unleashed a price war. That hit a market already reeling from the impact of the coronavirus outbreak.

“There have been expectations and forecasts of a streak of low prices for oil and energy,” Dmitry Peskov, spokesman for President Vladimir Putin, told reporters on Monday. “We are carefully watching the trends in the industry.”

Benchmark Brent crude traded near $30 barrel on Monday, the lowest since February 2016. If the crisis is not contained, the global market faces the possibility of the biggest six-month crude surplus ever recorded, according to IHS Markit.

While Putin has no current plans to hold discussions with the Saudi leadership, the Kremlin is keeping the door open for talks should they become necessary, Peskov said.

Russia’s budget, which relies on oil and gas for about 40% of its revenue, could post a deficit of as much as 1% of gross domestic product this year instead of the 0.8% surplus earlier forecast by the government, Finance Minister Anton Siluanov said Saturday, according to RIA Novosti.

The weaker ruble will provide some support, partially making up for oil’s decline. The Finance Ministry estimates that a 1 ruble drop in the exchange rate brings in about 70 billion rubles ($970 million) of extra revenue from taxes on energy exports.

Russia also benefits from a lower break-even oil price than many other countries, set at just over $40 a barrel for 2020-2022, compared with about $80 for Saudi Arabia.

Nevertheless, Russia’s central bank estimated last year that $25-a-barrel oil would push the country’s economy into recession in 2020.