After Saudi Energy Minister Khalid Al Falih said Opec+ would do “whatever it takes” to stabilise the oil markets, prices extended their declines for the fourth consecutive day, with US-China tension increasing.
Oil prices, which reversed a tilt towards a bearish market by rising tepidly towards the second half of May, have declined 10 per cent over the past four days as concerns weigh over oil demand growth, with the US and China facing off over trade.
Crude is down 20 per cent since its peak in late April this year.
A joint technical committee meeting of Opec+ led by sovereign producers Saudi Arabia and Russia submitted recommendations in Jeddah last month to tackle high oil inventory levels.
A continuation of current production cuts of about 1.2 million barrels per day in place since the start of January is widely expected at the alliance’s meeting this month.
Brent futures were trading at $60.37 per barrel at 2pm UAE time on Tuesday, $12 lower from the time of the group’s last meeting.
"There's an emerging consensus among Opec+ countries to continue their work towards market stability in the second half of the year, and Saudi Arabia will surely continue to play its central role alongside its Opec+ partners in this endeavour," Mr Al Falih told the Saudi Press Agency on Monday evening.
"We have previously stated our commitment to do whatever it takes to stabilise markets and we have delivered on those promises."
He said Saudi Arabia, the world’s largest exporter of crude, was closely monitoring recent developments in the market, which he said "exhibited an elevated level of volatility in recent weeks”.
Mr Al Falih said the volatility was “totally unwarranted” in light of market fundamentals, which he said remained healthy because of high conformity levels among the Opec+ producers.
Last month, the group had dismissed fears of weakening demand growth, with Mr Al Falih saying strengthening of US and Asian demand would maintain growth at a healthy pace.
The recent weakening in oil prices would bolster the resolve of Opec+ to continue prolonging their market balancing activities, energy consultancy JBC said in a recent note.
"If we, however, are not just looking at a temporary easing of economic growth, but a fully-blown recession as in 2008-09, in which demand ended up falling by 1.2 million bpd relative to 2007, any market stabilisation will become increasingly difficult to maintain,” JBC cautioned.
Fears of a US recession have also contributed to an increasingly bearish market.
US investment bank JP Morgan Chase warned recently that the possibility of the world’s largest economy sliding into recession in the second half of the year had jumped to 40 per cent from 25 per cent only a month ago.
Mr Al Falih highlighted increasing “trade friction and potential barriers” as the biggest obstacles affecting sustained demand growth and having a negative effect on the global economy.
He said that the alliance, which he is leading, would work to ensure market stability beyond June.
"To me, that means drawing down inventories from their currently elevated levels,” Mr Al Falih said.
Opec+ may extend its co-operation pact at the next meeting of the group in Vienna, from June 25 to 26.
