The deal is finally done — courtesy Russia. The Organisation of Petroleum Exporting Countries (Opec) and its non-Opec allies have agreed to cut global crude output by 1.2 million barrels per day (bpd) for six months, beginning January 2019.

However, the biggest takeaway of the deal has been the rising Russian clout on the crude markets. Ever since Russia gatecrashed Opec, without officially becoming a part of it, Moscow has seen its influence on the oil markets rise and rise.

Things have gone to the extent that before finalising a deal on output cut volumes, Opec ministers were kept waiting for a full day, for the Russian energy minister Alexander Novak to return to Vienna from Moscow after receiving fresh directives from President Putin and obtaining his consent to their next move on the global energy chessboard.

This was unthinkable, hardly until a few years back when Saudi Arabia’s former minster for energy Ali Al-Naimi was directing the energy policies of the Opec kingpin, Saudi Arabia. The compulsion of the Opec ministers to wait for Putin`s green signal to the deal is understandable. It went beyond the crude fundamentals. After all, President Putin was the only international leader at the recently held G20 summit in Buenos Aires to show publicly his bonhomie with the beleaguered Saudi crown prince Mohammad bin Salman (MBS), the de facto leader of the oil kingdom — Saudi Arabia.

For the last few days, oil markets were focused on Vienna. The outcome of the meeting was eagerly awaited all around the world — including the White House. The press corps was ready to transmit the meeting outcome, latest by Thursday evening, as everyone was expecting the decision to be announced on the day. Yet the decision had to be deferred until the return of the Russian energy minister from St. Petersburg after consulting his president.

Such fluid was the situation, that even Riyadh seemed unsure of the final outcome of the meeting until Novak was back. After the conclusion of the 175th meeting of the Opec ministerial in Vienna on Thursday, the Saudi energy minister Khalid al-Falih was non-committal on the issue. He told reporters that the kingdom is “not confident” an agreement on oil output cuts can be reached.

An Opec official told the waiting press corps, negotiations will continue Friday between the 15-member organisation and non-Opec oil-producing allies, which include Russia and nine countries, to discuss how much each would contribute to supply cuts. The producers’ contribution to the cuts to any output was the bone of contention, until the last moment.

Moscow was definitely reluctant to lower its output, to the extent Falih and others within the Opec wanted. While Opec ministers awaited Moscow`s decision, Novak dashed to Moscow, officially to attend the Eurasian Economic Union meeting in St. Petersburg, yet most in Vienna felt that he had gone to brief Putin on the ongoing discussions and seek his guidance on the issue. This was enough to indicate the leverage Moscow was enjoying on the global energy dynamics.

And in the meantime, Saudi Arabia was faced with a difficult balancing act. It was caught between a rock and a hard place. Initially, an Opec report indicated that in order to stabilise the crude markets, an output cut of somewhere around 1.5m bpd was required.

But then President Trump came in between. He did not want Opec to cut output. On Wednesday, while the global oil ministers were assembling in Vienna and behind the scene, energy diplomacy was at its peak, President Trump went on social media, underlining: “Hopefully OPEC will be keeping oil flows as is, not restricted. The World does not want to see, or need, higher oil prices.”

President Putin was also not much in favour of any big reduction in global output. Only a week ago, he had indicated that a crude market price of around $60 a barrel was acceptable to Russia. Secondly, Russian energy companies were also not in favour of large output reduction at this stage. Yet, Putin wanted MBS on his side. Hence, he agreed to be a part of the overall output cut arrangement.

But all this made Riyadh relook at the entire equation. Expectations from the ministerial were lowered. From an initial target of 1.3-1.5m bpd output cut, the final deal was for 1.2m bpd only.

Opec is no more the sole arbiter of global crude dynamics. Those days have gone and apparently, forever. And by lowering their output cut expectations, Saudi Arabia and its energy czar Khalid al-Falih seem to be conceding it.

Published in Dawn, December 9th, 2018