Oil stockpiles in the developed nations of the Organisation for Economic Co-operation and Development (OECD), which had been falling since early 2017, are rising again and are likely to exceed their five-year average level when October data are finalized, according to the International Energy Agency.

As oil prices have headed south, Saudi Arabia said it would cut exports by 500 000 barrels a day next month and warned fellow producers that they needed to cut about 1 million barrels a day from October production levels. That drew a lukewarm response from Putin and swift Twitter rebuke from Trump.

Bin Salman needs oil revenue to fund his ambitious plans to transform Saudi Arabia, while avoiding unrest from those hurt in the process. The International Monetary Fund forecasts that the kingdom will need an oil price of $73.30 (R1 027) a barrel next year to balance its fiscal budget.

Brent crude is trading about $5 below that, with Saudi Arabia’s exports trading at a discount to the North Sea benchmark. Prolonging output cuts for a third year is the only way he can realise the price he needs.

He will face more challenges from Putin and Trump. The Russian president shows no great enthusiasm for restricting his country’s production again. Moscow’s budget is much less dependent on oil prices than it was when Russia agreed to join Opec-led efforts to re-balance the oil market in 2016 and the country’s oil companies want to produce from the fields where they have invested.

Putin may yet decide that maintaining his improved political relationship with MBS, as the Crown Prince is known, is worth a small sacrifice. But it’s not a foregone conclusion that Russia will agree to extend output cuts when producers gather in Vienna next month. Putin says oil prices of around $70 a barrel suit him “completely”.

The opposition from Trump will – naturally – be much louder and comes at a time when he and MBS are trying to preserve their political relationship, while US senators consider harsher sanctions on Saudi Arabia in response to the war in Yemen and the killing of dissident journalist Jamal Khashoggi.

A bigger US threat to Saudi plans than Trump’s tweets will come from the Texas oil patch. American producers have added a volume equivalent to the entire output of Opec’s Nigeria in the past 12 months.

Their production could reach 12 million barrels a day by April, according to the Department of Energy. That is six months sooner than it was forecasting just a month ago and 1.2 million barrels a day more than it foresaw in January.

Saudi Arabia will have to risk Trump’s wrath, Putin’s indifference and a booming US shale industry if it hopes to balance the oil market in 2019.

Julian Lee is an oil strategist for Bloomberg. Previously he worked as a senior analyst at the Centre for Global Energy Studies.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

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