Plunge In Oil Prices Puts Pressures on Russia and Saudi Arabia

Russia and Saudi Arabia could face economic and political consequences at home if the oil-production deal isn’t extended.

The world’s major oil producing countries struck a deal in November to cut production.  OPEC and some non-OPEC producers hope to end the global oil glut, which has kept prices depressed for over two years.

That six-month deal is about to expire.  Investors are now trying to parse whether it’ll be extended amid perennial geopolitical tensions and overlapping strategic market interests.

Russia and Saudi Arabia face economic and political pressures at home.  These could be exacerbated by another dip in oil prices.

Both countries have seen weaker economic growth recently. The Russian economy has been in contraction mode for two years.  Furthermore, the IMF now projects the Saudi economy will grow by 0.4% in 2017.  This would be down from 1.4% last year.

In addition the Saudis continue to grapple with the expensive military campaign in Yemen.

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