RIYADH: Opec leader Saudi Arabia’s energy minister said on Monday (Aug 22) that the oil cartel and its allies have the means to deal with market challenges – including by “cutting production”.
“Opec+ has the commitment, the flexibility, and the means within the existing mechanisms ... to deal with such challenges including cutting production at any time”, Prince Abdulaziz bin Salman (pix) said in an interview with Bloomberg, according to Saudi state news agency SPA.
The Saudi-led Organization of the Petroleum Exporting Countries (Opec) consists of 13 members.
Opec and 10 allies led by Russia – a group known as Opec+ – agreed last month to raise production by 100,000 bpd in September following Western calls for more output after Russia’s war in Ukraine and a post-pandemic surge in demand sent crude prices soaring. They had agreed to increases of almost 650,000 bpd in July and August, but the cartel has struggled to meet its quotas.
Oil prices have dropped from a peak in June due to growing supplies as well as concerns over the deteriorating economic outlook.
Prince Abdulaziz was quoted as saying the oil futures market has fallen into “a self-perpetuating vicious circle of very thin liquidity and extreme volatility”, making the cost of hedging and managing risks for market participants prohibitive.
He also was quoted as saying prices were falling based on “unsubstantiated” information about demand destruction and confusion around sanctions, embargoes and price caps, which have been proposed by the United States on Russian oil.
Meanwhile, risks of supply disruptions remained high and a global spare capacity cushion was very thin, said Prince Abdulaziz, adding that a new deal between Opec+ partners beyond 2022 would help.
Opec raised production by 162,000 barrels in July to a total of 28.8 million bpd, with most of the output coming from Saudi Arabia, the United Arab Emirates and Kuwait, according to its monthly report.
“In Opec+ we have experienced a much more challenging environment in the past and we have emerged stronger and more cohesive than ever,“ said Prince Abdulaziz. “Soon we will start working on a new agreement beyond 2022,” he added. – AFP, Reuters