Saudi Arabia has urged fellow oil producers to “keep our powder dry” in the face of persistent uncertainty linked to the pandemic, as the Opec cartel and its allies discuss whether to unleash a flood of crude on to the market.
Prince Abdulaziz bin Salman, oil minister and son of King Salman, said on Thursday that while there was “no doubt” the market had improved since January, he wanted to “urge caution and vigilance”.
“Before we take our next step forward, let us be certain that the glimmer we see ahead is not the headlight of an oncoming express train,” he said, as a meeting of oil ministers got under way.
“The right course of action now is to keep our powder dry, and to have contingencies in reserve to ensure against any unforeseen outcomes.”
Supply curbs by Saudi Arabia-led Opec, Russia and other countries had “accelerated the rebalancing process” in the face of an oil collapse last year as the pandemic raged across the world, said Prince Abdulaziz.
Record supply curbs of almost 10m barrels a day agreed last April, together with a more careful approach to unwinding these cuts — to about 7m b/d — has kept oil prices in check in recent months.
The Opec+ group should not “endanger” this progress, he added.
Talks on Thursday will largely centre on whether producers should go ahead with a 500,000 b/d collective increase in supplies from April. Saudi Arabia is also going to decide how, and whether, to unwind its own voluntary extra cut of 1m b/d.
Brent crude rose 2 per cent after the comments to $65.30 a barrel.
Travel bans and government lockdowns to combat the spread of coronavirus hit demand for oil dramatically last year and forced global producers to take collective action to bolster prices.
Optimism about the rollout of vaccines around the world has helped crude prices recover above $60 a barrel, but some ministers are wary about releasing too much oil on to the market.
Russia, Saudi Arabia’s key partner in the Opec+ oil alliance, has sought to raise production at a faster pace than the kingdom has wanted, concerned about handing over market share to rivals.
“Certainly the Russians want more oil out there,” said one Opec delegate. “They’ve maintained this position for some time.”
Alexander Novak, Russia’s deputy prime minister, said while the new strains of coronavirus presented a big “uncertainty”, the oil market was “in much better shape” than recent months.