OPEC leader Saudi Arabia’s energy minister on Monday said 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 said in an interview with Bloomberg, according to Saudi Arabian state news agency SPA.
Saudi Arabia-led OPEC consists of 13 members.
Photo: Reuters
OPEC and 10 allies led by Russia — a group known as OPEC+ — last month agreed to raise production by 100,000 barrels per day next month following Western calls for more output after Russia’s invasion of Ukraine and a post-COVID-19 pandemic surge in demand sent crude prices soaring.
They had agreed to increases of almost 650,000 barrels per day last month and this month, but the cartel has struggled to meet its quotas.
Oil prices rose to trade near US$91 a barrel after Prince Abdulaziz said OPEC+ might be forced to cut production to stabilize a volatile market.
“Volatility and thin liquidity send erroneous signals to markets at times when clarity is most needed,” Prince Abdulaziz told Bloomberg.
He warned that a “vicious circle” was being “amplified by the flow of unsubstantiated stories about demand destruction, recurring news about the return of large volumes of supply, and ambiguity and uncertainty about the potential impacts of price caps, embargoes and sanctions.”
OPEC raised production by 162,000 barrels last month to a total of 28.8 million barrels per day, 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,” Prince Abdulaziz said. “Soon we will start working on a new agreement beyond 2022.”
Oil futures have lost about one-quarter since early June as escalating fears of an economic slowdown threatened the demand outlook. The potential revival of a nuclear deal with Iran, which could lead to a surge in crude exports from the OPEC producer, added to the bearish sentiment.
Traders were watching Purchasing Managers’ Index data from the US and Europe yesterday to glean further clues on the state of the global economy, ahead of the US Federal Reserve’s Jackson Hole symposium at the end of this week.
Additional reporting by Bloomberg
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