Saudi Arabia, Opec+ cautious on ramping up crude output

ALBAWABA — Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman on Saturday said the kingdom would remain cautious before committing to hiking crude output with its OPEC+ counterparts.

A 23-country bloc of oil producing countries co-chaired by Saudi Arabia and Russia make up the OPEC+ cartel.

China’s reopening and encouraging economic data from some major oil consuming countries in recent weeks has prompted some oil market forecasters to project stronger demand in the coming months, causing prices to rise beyond $100 a barrel, the minister noted that Saudi Arabia would need clearer signs of rising oil demand in order to move on any output changes.

“With all due respects, forecasters are good forecasters. They do their best but not necessarily what they forecast happens as a reality. So, if people can adapt it to my other mode, which is, ‘I will believe it when I see it, and then take action’ — it’s a much more profound, self-assuring, cautious approach.

“I will believe it when I see it and then take action,” Bin Salman said at the 44th International Conference on Energy Economics in Riyadh, while warning that western sanctions on Russia would lead to supply shortages.

“Sanctions, embargoes, lack of investments will all convolute into one thing and one thing only (the) lack of energy supplies when it is most needed, (which) is something I don’t want to be responsible for,” the prince added.

On Feb. 1 the cartel’s Joint Ministerial Monitoring Committee recommended maintaining current output quotas, which had been slashed in October 2022 by 2 million barrels per day from November until the end of 2023, causing tension with the United States at the time.

The Price Cap Coalition, composed of the United Kingdom, the United States, the European Union, Japan, Canada and Australia on Feb. 3 announced price caps on fuel products, along with a ban on the importation of refined products from Russia starting on Feb. 5, having imposed a similar embargo on Russian crude in December meant to limit the revenue Moscow gets from energy exports as part of the West’s broader multilateral response to its invasion of Ukraine.

The price cap was set at $100/b for the sale of refined products that trade at a premium to crude, particularly diesel, while discounted products, such as fuel oil and naphtha, are capped at $45/b.

Bin Salman warned that sanctions against energy producers will backfire if and when demand does pick up quickly.

“I don’t get into this sanctions business. I focus on the reality of the day, with what is happening. I hope (the sanctions on Russia) would not lead to shortages of energy supplies, not (just) oil supplies but energy supplies,” Bin Salman added.

Bloomberg reported that Saudi Arabia has continued to work closely with Russia on OPEC+ matters since the invasion. Crown Prince Mohammed bin Salman spoke to Russian President Vladimir Putin two days before the JMMC’s meeting.

Oil prices fell to over three-week lows on Friday in a volatile session, Reuters reported, after strong U.S. jobs data raised concerns about higher interest rates and as investors seek out more clarity on the Price Cap Coalition’s actions on Russian oil and derivatives.

It was another rough week for oil as “cooling optimism over the demand outlook and rising U.S. stockpiles (4.1-million-barrel increase for week ended Jan. 27) kept bears in a position of power,” Lukman Otunuga, manager, market analysis at FXTM, told MarketWatch.