Saudi Energy Minister Prince Abdulaziz bin Salman al-Saud arrives at the Organization of the Petroleum Exporting Countries (OPEC) meeting in Vienna on June 3, 2023
Joe Klamar | Afp | Getty Images
Saudi Energy Minister Prince Abdulaziz bin Salman defended the voluntary output cuts announced by some allied oil producers in April, which he noted were first criticized as likely to raise oil prices – and then not supported.
On April 3, several producers from the Organization of the Petroleum Exporting Countries and its partners — collectively known as OPEC+ — revealed an overall output decline of 1.66 million barrels per day through the end of this year.
This Sunday, extended these measures until the end of 2024, with Riyadh announcing another voluntary and expandable drop of 1 million a day starting in July. OPEC+ has otherwise collectively decided to stick to its 2023 production targets of 40.463 million barrels per day next year.
The news comes after months of macroeconomic worries — including the collapse of several U.S. and European banks, a potential global recession and a slower-than-expected recovery in Chinese demand — hit oil prices in the early months of the year. .
On Sunday, the Saudi oil minister defended the voluntary steps as a precaution.
“It was just our receptivity, if you call it, that the environment wasn’t conducive enough for the confidence to be there. So taking precautions tends to put you on the safe side. And it’s part of the typical rhythm that we have.” installed in OPEC that is proactive and preventive,” Abdulaziz told CNBC’s Dan Murphy.
“The tool is with us. It doesn’t mean we’re guaranteed things will go wrong, left or right.”
He noted that critics of April’s voluntary cuts accused OPEC+ of trying to raise prices, which would in turn fuel inflation — and later “backpedaled and said the OPEC+ action failed. [rise] prices.”
The alliance has repeatedly found itself at odds with international consumers. The United States, for example, has emerged as a vocal critic, citing concerns about the strain on households already struggling with high prices.
Framework changes
Abdulaziz also said he thought the long-term framework changes agreed at Sunday’s OPEC+ meeting would lead to a fairer allocation of quotas among producers who have increased or used up their spare capacity.
OPEC+ now intends to have three independent analysts – IHS, Wood Mackenzie and Rystad Energy – examine the individual capacity of each OPEC+ member to inform their default values - the initial level from which producers cut their output.
“We hope that by the middle of next year we will have new baselines and a way forward that will make it fairer and more equitable for everyone to allocate production levels that are commensurate with their capacities in the most transparent way,” the energy minister said.
Asked if the group could trust ally Russia, whose export levels have been opaque since the imposition of Western sanctions on oil and oil products, Abdulaziz added: “Absolutely. [the] President [Ronald] Reagan’s line, “Trust, but verify,” highlights the critical role of independent sources in assessing production.