Saudi Energy Minister: OPEC+ Does Not Target Specific Price Range

The Saudi Energy minister said OPEC+ sought to support market stability and balance supply and demand (Asharq Al-Awsat)
The Saudi Energy minister said OPEC+ sought to support market stability and balance supply and demand (Asharq Al-Awsat)
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Saudi Energy Minister: OPEC+ Does Not Target Specific Price Range

The Saudi Energy minister said OPEC+ sought to support market stability and balance supply and demand (Asharq Al-Awsat)
The Saudi Energy minister said OPEC+ sought to support market stability and balance supply and demand (Asharq Al-Awsat)

Saudi Energy Minister Prince Abdulaziz bin Salman stressed that OPEC+ did not target specific prices or price ranges, but rather sought to support market stability and balance supply and demand for the benefit of the petroleum industry.

Prince Abdulaziz, who chairs the ministerial committee in the OPEC+ alliance, told an interview with Energy Intelligence, on Wednesday, that the decision to cut 100,000 barrels of oil per day until next October was “an expression of our willingness to use all of the tools in our kit.”

“This simple tweak shows that we are attentive, pre-emptive and proactive in terms of supporting the stability of the market to the benefit of market participants and the industry,” he added.

The minister explained that the reduction was a measure to return to the production levels of August, noting that the increase of 100,000 barrels per day was planned for the month of September only.

“As the OPEC+ meeting clearly stated, this measure was a reversion to the production level of August. The addition of the 100,000 barrels in September was always intended as a measure for that month only,” he told Energy Intelligence.

Commenting on the signs of a looming global economic recession, the minister said: “We are seeing mixed signals in relation to economic growth from different parts of the world, and there has been a tendency towards exaggeration in some of the negative analyses of the global economic situation.”

He continued: “In this regard, we think the jury is still out, but that only reinforces the need to be ready to use all the tools in our kit. It’s also worth highlighting that historical data indicates that you could have recessions with limited oil demand contractions and in fact you could even have demand growth in recession years as was the case in 1991.”

Prince Abdulaziz said he believed that the oil futures market has fallen into a “self-perpetuating vicious circle in the paper market of extreme volatility and very thin liquidity.”

“This has undermined the market’s essential function of efficient price discovery, with prohibitive costs for users of hedging and risk management techniques in oil and other commodities, creating new types of risk and instability. This cycle is exacerbated by speculative reports and analysis about demand destruction, possible return of large supply volumes, and measures related to price caps, embargoes and sanctions,” the minister remarked.

Asked whether OPEC+ had any intention of defending a certain price range, he stressed that the group did not target prices or price ranges.

“Its aim is to support market stability and supply and demand balance for the benefit of market participants and the industry,” he stated.



OPEC Again Cuts 2024, 2025 Oil Demand Growth Forecasts

The OPEC logo. Reuters
The OPEC logo. Reuters
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OPEC Again Cuts 2024, 2025 Oil Demand Growth Forecasts

The OPEC logo. Reuters
The OPEC logo. Reuters

OPEC cut its forecast for global oil demand growth this year and next on Tuesday, highlighting weakness in China, India and other regions, marking the producer group's fourth consecutive downward revision in the 2024 outlook.

The weaker outlook highlights the challenge facing OPEC+, which comprises the Organization of the Petroleum Exporting Countries and allies such as Russia, which earlier this month postponed a plan to start raising output in December against a backdrop of falling prices.

In a monthly report on Tuesday, OPEC said world oil demand would rise by 1.82 million barrels per day in 2024, down from growth of 1.93 million bpd forecast last month. Until August, OPEC had kept the outlook unchanged since its first forecast in July 2023.

In the report, OPEC also cut its 2025 global demand growth estimate to 1.54 million bpd from 1.64 million bpd, Reuters.

China accounted for the bulk of the 2024 downgrade. OPEC trimmed its Chinese growth forecast to 450,000 bpd from 580,000 bpd and said diesel use in September fell year-on-year for a seventh consecutive month.

"Diesel has been under pressure from a slowdown in construction amid weak manufacturing activity, combined with the ongoing deployment of LNG-fuelled trucks," OPEC said with reference to China.

Oil pared gains after the report was issued, with Brent crude trading below $73 a barrel.

Forecasts on the strength of demand growth in 2024 vary widely, partly due to differences over demand from China and the pace of the world's switch to cleaner fuels.

OPEC is still at the top of industry estimates and has a long way to go to match the International Energy Agency's far lower view.

The IEA, which represents industrialised countries, sees demand growth of 860,000 bpd in 2024. The agency is scheduled to update its figures on Thursday.

- OUTPUT RISES

OPEC+ has implemented a series of output cuts since late 2022 to support prices, most of which are in place until the end of 2025.

The group was to start unwinding the most recent layer of cuts of 2.2 million bpd from December but said on Nov. 3 it will delay the plan for a month, as weak demand and rising supply outside the group maintain downward pressure on the market.

OPEC's output is also rising, the report showed, with Libyan production rebounding after being cut by unrest. OPEC+ pumped 40.34 million bpd in October, up 215,000 bpd from September. Iraq cut output to 4.07 million bpd, closer to its 4 million bpd quota.

As well as Iraq, OPEC has named Russia and Kazakhstan as among the OPEC+ countries which pumped above quotas.

Russia's output edged up in October by 9,000 bpd to about 9.01 million bpd, OPEC said, slightly above its quota.