Saudi Arabia’s energy minister says ‘rough seas’ persist in oil market

Saudi Arabia’s energy minister warned fellow producers in the Opec+ oil alliance that crude’s recovery was “far from complete” as countries meet to decide whether to release additional barrels on to the market. 

Abdulaziz bin Salman, who is the son of Saudi Arabia’s king, said on Thursday that even as market conditions had improved “the waves are still tall and the sea remains rough”, with the coronavirus pandemic still wreaking havoc across the world. 

In Europe governments are imposing new restrictions and lockdowns to curb the virus’s spread while new variants are creating fresh uncertainties even as the global rollout of vaccines provides optimism. 

“Until the evidence of the recovery is undeniable, we should maintain this cautious stance,” Prince Abdulaziz told reporters and ministers ahead of the formal virtual gathering of oil officials.

Opec and allies outside the cartel, led by Russia, agreed in April 2020 to cut a record 9.7m barrels a day. The Opec+ group has gradually unwound these curbs to about 7m b/d, with producers meeting monthly to decide how much oil to unleash on the market. 

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In December Opec+ agreed that it would increase output by up to 500,000 b/d in the coming months, but after raising production in January it held back from further increases as uncertainty loomed about consumption. The kingdom also implemented a voluntary cut of its own of about 1m b/d.

Optimism about the impact of vaccines on global economies helped crude prices recover towards $70 a barrel. The price of Brent crude has since retreated to about $64 a barrel. 

Alexander Novak, who is Russia’s deputy prime minister, however, provided a more upbeat view of the oil market, saying it had improved substantially and there was a deficit of 2m b/d.

Saudi Arabia is facing pressure from countries such as Russia and the UAE to increase production. Novak said Opec+ had to ensure the market did not “overheat”.

Consumer countries are watching Opec+’s actions carefully, with those such as India wary about producers keeping too tight a hold on output that will only propel a surge in prices, swelling the coffers of oil economies.

Jennifer Granholm, US energy secretary, added another layer of uncertainty into the group’s decision-making. She called Prince Abdulaziz on Wednesday to emphasise the importance of “affordable” energy.

“Opec+ seems to be preparing for small, regular production increases, whether they come in May or later,” said Amrita Sen at Energy Aspects, a consultancy. “But there is no clarity on how such amounts would be distributed . . . and when and how Saudi Arabia brings back its 1 mb/d voluntary cut.”

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