Saudi Arabia is 'cautiously' optimistic over future oil demand despite global Covid surge, energy minister says

Chinese entities have expressed interest in developing the kingdom's nascent hydrogen as well as downstream sectors

Venezuela's Oil Minister Manuel Quevedo, Saudi Arabia's Minister of Energy Prince Abdulaziz bin Salman Al-Saud and Russia's Energy Minister Alexander Novak are seen at the beginning of an OPEC and NON-OPEC meeting in Vienna, Austria December 6, 2019. REUTERS/Leonhard Foeger

Saudi Arabia, the world's largest exporter of energy, "cautiously" anticipates an increase in demand for crude, despite the Covid-19 infections soaring in many parts of the world, notably India, its energy minister said.

"Crises come and go and we can’t link our future to a crisis. The situation will go back to normal eventually," Prince Abdulaziz bin Salman told China's CGTN Arabic channel in an interview aired late Monday.

"We think that the future will bring about an increase of oil demand," he added.  
"The coronavirus crisis is still oscillating - we see openings here and lockdowns there. This makes us more cautious so we don't want to be over-optimistic but not also not over-pessimistic."

While several developed economies are rolling back Covid-related restrictions in place for more than a year, developing nations such as India are facing a record surge in infections with more than 20 million cases. India, the world's third-largest oil consumer, has grounded air transportation with various states enforcing lockdowns to contain the latest outbreak.

Still, Opec remains optimistic over demand growth. Last month, the group revised oil demand growth upwards by 100,000 barrels per day for 2021, on the back of a stronger economic rebound supported by stimulus programmes in the world's largest economies.

The group, known as Opec+, which includes non-member producers led by Russia, undertakes supply corrections in the global oil market. Last week, the bloc kept production curbs at current levels as it looked to balance recovery with a sharp rise in cases in some countries.

Opec+ plans to incrementally add a total output of 2 million bpd by July, despite the growing surge of Covid-19 infections in India.

Saudi Arabia, which supported the group's restrictions by volunteering to cut 1 million bpd until April, will phase out the curbs from May onwards.

Opec+ came together this time last year to enforce one of the steepest production cuts in history, drawing back 9.7 million bpd from the markets in response to a historic demand crunch due to Covid-19.
The group has since phased out cuts and plans to bring back more supply in line with increase in demand.

Overall conformity with the Opec+ pact reached 115 per cent in March. Countries that did not comply with the group's tight lid on output earlier in the year have until September to make up for overproduction, said Prince Abdulaziz.

"I can't say that the compensation mechanism’s success is complete but it has surpassed what a lot of commentators expected," he told the Chinese TV channel.

The kingdom also plans to add 50 per cent renewable energy capacity to its power mix by 2030.

Saudi Arabia plans to become a top exporter of hydrogen, an alternative fuel, that is being prioritised for investment by Gulf oil exporters.

"China has recently shown interest in hydrogen and we are now working on our hydrogen strategy," Prince Abdulaziz told CGTN Arabic.

Chinese entities have also expressed interest in refining and petrochemicals sectors in the kingdom, he added. The Asian country is the world's biggest consumer of oil and the world's second largest economy.

"We are still keen on more co-operation and investments in the kingdom in refining and petrochemicals sectors," Prince Abdulaziz said.

On the upstream front, the kingdom is on track to increase production capacity at its Zuluf and Marjan offshore oil fields.

"The decision was taken last year at the peak of the crisis", Prince Abdulaziz said with the view to meeting higher demand in a post-pandemic global economy.

The work at the massive offshore fields will add 1.15 million bpd production capacity by 2024.