Saudi Energy Minister Prince Abdulaziz bin Salman said on Tuesday that the Kingdom will not sell oil to any country that attempts to impose a price cap on its supplies, stressing that the Kingdom has embarked on expanding its capacity to 13.3 million b/d by 2027.
Prince Abdulaziz made his remarks in an interview with "Energy Intelligence", during which he stressed that there are many factors influencing market sentiment, adding that the global economy is forecasted to continue growing this year and next year.
"But there is still uncertainty around the pace of growth," he noted, also citing that China has just started to rebound after extended Covid lockdowns.
"But the duration for recovery is still unclear."
The Prince said that economic recovery is generating inflationary pressures, which could prompt central banks to intensify efforts to tame inflation, stressin that "interplay" of these and other factors limits clarity, and the sensible and only course of action in such an uncertain environment is "to maintain the agreement we struck last October for the rest of this year and that is what we intend to do. We need to ascertain that the positive indicators are sustainable."
"There are those who continue to think that we would adjust the agreement before the end of year. For those I say they need to wait until Friday, Dec. 29, 2023 to demonstrate to them our commitment to the current agreement," the Energy Minister noted.
Asked about the Nopec bill, Prince Abdulaziz pointed to the difference between Nopec legislation and extending the price cap, saying, however, that their potential impacts on the oil market are similar as such policies add new layers of risk and uncertainty "at a time when clarity and stability are most needed."
"I must reiterate the view I made on record back in August and September on how such policies would inevitably exacerbate market instability and volatility, and would negatively impact the oil industry. In contrast, Opec-plus has made every effort and succeeded in bringing significant stability and transparency to the oil market, especially compared to all other commodity markets."
According to the Saudi Energy Minister, the Nopec bill does not recognize the importance of holding spare capacity and the consequences of not holding spare capacity on market stability, and it would also undermine investments in oil capacity and will cause global supply to fall severely short of future demand.
"The impacts will be felt all over the world on producers and consumers alike, as well as on the oil industry."
"The same holds for price caps, whether imposed on a country or a group of countries, on oil or any other commodity. This will lead to individual or collective counter-responses with intolerable consequences in the form of massive volatility and instability. So if a price cap were to be imposed on Saudi oil exports, we will not sell oil to any country that imposes a price cap on our supply, and we will reduce oil production, and I would not be surprised if others do the same," he added.
Concerning global spare capacity, Prince Abdulaziz affirmed that both spare capacity and global emergency stocks are the ultimate safety net for the oil market in face of potential shocks, saying he repeatedly warned that global demand growth will outpace current global spare capacity, while emergency reserves are at a historic low.
"That is why it is crucial that policies are put in place to support investments needed to increase spare capacity in a timely manner, and that global emergency stocks are maintained at an adequate and comfortable level."
Prince Abdulaziz revealed that the Kingdom of Saudi Arabia has proactively embarked on expanding the capacity to 13.3 million b/d by 2027, stressing that the expansion is "already under way in the engineering phase and the first increment is expected to come onstream in 2025."
