Saudi Energy Minister: Opec+ cuts aimed at less market volatility, not price control

Group's actions are no different from those taken by global central banks to control inflation, Prince Abdulaziz bin Salman says

Prince Abdulaziz bin Salman, Saudi Arabia's Energy Minister, at the World Petroleum Congress in Calgary, Alberta, Canada. Bloomberg

The Opec+ alliance of oil-producing countries is not aiming for price control through its output cuts, but less volatility in the market, Saudi Arabia’s Energy Minister has said.

The group wants to be “proactive” and “pre-emptive”, Prince Abdulaziz bin Salman was quoted as saying at the World Petroleum Congress in Calgary, Alberta, on Monday.

He also said that the group’s conduct was “benign” and no different from actions taken by global central banks to control inflation.

His remarks come as oil prices hover near $95 a barrel amid expectations of a large crude deficit in the fourth quarter and signs of economic recovery in China.

In its monthly oil market report last week, Opec said it expected a supply deficit of 3.3 million barrels per day over the next three months.

The minister also said there was ongoing uncertainty regarding Chinese demand, European economic growth and interest rate actions.

China's post-coronavirus economic recovery lost momentum mainly as a result of a deepening property slump and weak consumer spending.

The country, which is the world’s largest crude importer and second-largest economy, recently announced a string of stimulus measures, including halving the stamp duty on stock transactions and easing mortgage rates.

Earlier this month, Saudi Arabia and Russia said that they would extend supply cuts of a combined 1.3 million bpd to the end of the year.

As part of their voluntary cuts, the kingdom is extending its output reduction of 1 million bpd until December while Russia is rolling over its export cut of 300,000 bpd until the end of the year.

At its August meeting, Opec+ agreed to stick to its current output policy.

The group has total production cuts in place of 3.66 million bpd, which includes a 2 million bpd reduction agreed on last year as well as voluntary cuts of 1.66 million bpd announced in April.

Brent crude has gained roughly a third in value since falling to a low of $71.84 a barrel in June this year.

Meanwhile, in a speech at the same event, Saudi Aramco's president and chief executive Amin Nasser said that the notion of peak oil demand is “wilting under scrutiny because it is mostly being driven by policies, rather than the proven combination of markets, competitive economics and technology”.

“In oil, one widely publicised scenario calls for global demand to fall by more than 25 million bpd by 2030,” he said.

“Yet oil consumption is projected to approach 103 million bpd in the second half of this year, which would be a record.”

President chief executive of Saudi Aramco Amin Nasser speaks during the Saudi Green Initiative Forum in October 2021. Reuters

He also called for action to avert a more serious energy crisis and avoid a North-South transition divide.

“While much of the Global North is focusing on environmental sustainability, the priority for many in the Global South is economic survival,” he said.

“Transition planning has not sufficiently recognised this clear need for distinctive solutions, and a widening divide is an inevitable result.”

He called for an energy transition plan that is multi-source, multi-speed and multidimensional.

“The current transition shortcomings are already causing mass confusion across industries that produce and/or rely on energy,” Mr Nasser said.

“Long-term planners and investors do not know which way to turn. It is increasing the risk of acute supply-demand imbalances in conventional energy, and therefore an even more serious energy crisis where countries and people, not just assets, are stranded.”

He also called for a more realistic and robust energy transition plan that emphasises the continued deployment of new energy while recognising the need for conventional energy.

“We are talking about the complete transformation of a $100 trillion global economy today. One that is likely to roughly double in size by 2050, with close to an additional two billion energy consumers,” Mr Nasser said.

“In short, the reinvention of our entire energy-based way of life in less than 30 years. Let us be inspired by that, but understand it means making history.”

Updated: September 18, 2023, 5:14 PM