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New Oil Order Heralded By Saudi-Russia Detente

New Oil Order Heralded By Saudi-Russia Detente
Volumes about the new relationship between the energy superpowers were expressed by a meeting between the two men who run Russia and Saudi Arabia's oil empires.
Going beyond the numerous times they had simply encountered each other at oil events around the world, it was the first time that Rosneft boss Igor Sechin and Saudi Aramco chief Amin Nasser had held a formal, scheduled meeting.
the CEOs discussed possible ways of cooperating in Asia, such as Indonesia and India, as well as in other markets, sources familiar with the talks in the Saudi city of Dhahran last week told the media as their conversation broke new ground.
While declining to give details of the closed-door talks, State oil giant Aramco confirmed that the meeting took place. Kremlin oil major Rosneft declined to comment.
An insight into the newfound, unexpected and fast-deepening partnership between the two countries was given by the meeting as Nasser give Sechin a tour of Aramco's HQ, according to the sources.
In the past, such a detente between Moscow and Riyadh would have been almost unthinkable.
Even in the face of a spike in U.S. shale oil production that had led to a collapse in global prices from mid-2014, the two sides had virtually no dialogue at all up until a year ago. Russia cutting output in tandem with OPEC was strongly opposed by Sechin.
Rosneft outbid Aramco and boosted its share in the world's fastest growing fuel market by buying India's refiner Essar last year in a sign of their white-hot Asian rivalry.
And now, Moscow and Riyadh are even discussing possible cooperation in their core Asian markets and have become the main protagonists of the pact to cut output - agreed in December and extended last week in a matter of months.
"It is a new 'axis of love'," one senior Gulf official said of the relationship.
They would deepen cooperation in oil and work on narrowing their differences over Syria, where Moscow and Riyadh are backing opposing sides in a civil war, said Putin Saudi Deputy Crown Prince Mohammed bin Salman where the later was welcomed in the Kremlin.
"The most important thing is that we are succeeding in building a solid foundation to stabilize oil markets and energy prices," said Prince Mohammed.
The countries would work together to resolve a "difficult situation", Putin said.
Six months after oil prices began tumbling from above $100 a barrel and with both sides unable to agree joint actions at an OPEC meeting in December 2014, the first attempt at cooperation between the two countries failed spectacularly.
And even if prices fell to $20 per barrel, Sechin pledged to keep pushing output higher, adding insult to injury. And by saying the Russian oil output would collapse as a result of low prices, a prediction that turned out to be wrong, Saudi's then oil minister, Ali al-Naimi, had retaliated.
And now the unlikely partnership between Moscow and Riyadh has been born out of necessity as much has changed since then, economically and politically.
Borrowing a famous phrase used by European Central Bank President Mario Draghi five years ago to defend the euro, Novak and Falih reiterated in Moscow they would do "whatever it takes" to stabilize oil markets, on Tuesday.
"Both Russia and the Gulf countries are interested in some type of oil price stabilization and they hope that they can achieve this without undertaking a sort of massive cuts which they had to do back in the 1980s," said Paul Simons, a former U.S. diplomat now serving as deputy executive director of the International Energy Agency.
"It is necessary to work out new framework principles for continued cooperation between OPEC and non-OPEC even after the expiration of the Vienna agreements," Novak said on Wednesday.

Christopher J. Mitchell

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