Saudi and Russia-led oil producers’ alliance prepared to wait for “real numbers” before adjusting policies amid price volatility
The influential Saudi and Russia-led oil producers’ alliance is taking a precautionary approach and is willing to wait for months for guidance from “real numbers” before making any adjustments to their policies in response to the price volatility in the crude market. This was revealed by Saudi Energy Minister Prince Abdulaziz bin Salman on Sunday during the MENA Climate Week in Riyadh.
Prince Abdulaziz emphasized the importance of cohesion within the OPEC+ alliance and stated that they have already overcome challenging situations in the past. He reassured that they will not have to face any terrible situations going forward. Despite potential delays in decision-making, he reiterated his commitment to the precautionary approach.
The OPEC+ alliance made a decision last October to remove 2 million barrels per day of production from the oil market. Since then, some members have implemented additional voluntary production cuts, including Saudi Arabia and Russia. These additional cuts will continue until the end of this year.
A recent meeting of the Joint Ministerial Monitoring Committee, a technical OPEC+ committee, took place on October 4 to review market fundamentals and compliance with production obligations. The committee concluded the meeting without calling for an emergency ministerial meeting to adjust output strategy.
Prince Abdulaziz expressed his hope that further coordinated production action would not be necessary to maintain market stability at the start of 2024. However, he emphasized that the capabilities of OPEC+ should not be overlooked and that they can take action if needed.
The recent supply crunch and recoveries in demand initially led to higher oil prices. However, prices have once again tumbled due to concerns about macro-economic factors, particularly the high interest rate environment. Oil prices have also been impacted by geopolitical tensions, such as the escalating conflict between Israel and Hamas.
In addition to these factors, the International Energy Watchdog’s prediction that demand for oil, gas, and coal will peak by 2030 has also had an impact on prices. OPEC officials have objected to this prediction and advocated for simultaneous investment in fossil fuels and renewable energy sources to prevent energy shortages.
Prince Abdulaziz emphasized Saudi Arabia’s commitment to addressing climate change and its intention to use every source of energy. The energy transition commitments of OPEC+ countries have faced criticism due to the carbon emissions associated with fossil fuels.
Observers are closely monitoring oil futures prices following the recent Middle East conflict between Israel and Hamas. The conflict erupted at a critical point in Middle Eastern diplomacy, as the U.S. has been pushing for normalization of ties between Israel and Saudi Arabia. Prince Abdulaziz deferred comment on OPEC+’s response to the conflict to the Saudi foreign ministry but highlighted the alliance’s ability to navigate global challenges like the Covid-19 pandemic.
Overall, Prince Abdulaziz emphasized the importance of maintaining the cohesion of the OPEC+ alliance and expressed confidence in their ability to handle any challenges that may arise in the future.