Saudi Energy Minister Prince Abdulaziz bin Salman bin Abdulaziz Al Saud stressed on Tuesday that OPEC+ members leave politics out of the decision making process and out of their assessments and forecasting.
In an interview with the Saudi Press Agency (SPA), he added: “As I have emphasized multiple times, in OPEC+ we leave politics out of our decision-making process, out of our assessments and forecasting, and we focus solely on market fundamentals.”
“This enables us to assess situations in a more objective manner and with much more clarity and this in turn enhances our credibility.”
“Examples abound. At the start of the Ukraine crisis, some predicted large supply losses of more than 3 million b/d which caused panic and contributed to extreme volatilities. At that time, many accused OPEC+ of being behind the curve and not responding to a crisis in a timely manner. But these projected losses did not materialize,” he remarked.
“Back in October when OPEC+ took the decision to cut output, it was heavily criticized. The decision was described as ‘very risky’, ‘unfortunate’, and there were suggestions that it was driven by political motivations and that the decision would tip the global economy into recession and would cause harm to developing countries,” he noted.
“Again, in retrospect, the OPEC+ decision turned out to be the right one for supporting the stability of the market and the industry,” Prince Abdulaziz told SPA.
“The problem with politicizing statistics and forecasting and using them to discredit OPEC+ and its stabilizing role, is that it agitates consumers and creates confusion in the market and gives rise to anomalies and misguided interpretations, all of which contribute to unnecessary volatility,” he went on to say.
“There is also inherent serious inaccuracy in some forecasts. OPEC+ has maintained its demand figures for 2021 while some others have grossly and consistently underestimated historical and current demand resulting in discrepancies often referred to as ‘the puzzle of the missing barrels’. They were eventually forced to resolve these discrepancies in early 2022 by adjusting demand upwards,” continued the minister.
“It would not come as a surprise if the issue of missing barrels reemerges in early 2023, keeping up with the same pattern of underestimating demand yet again in 2022.”
“At the end of the day, playing politics with statistics and forecasting and not maintaining objectivity often tend to backfire and result in loss of credibility,” he stressed.
Furthermore, he said: “In the last few years, the market has been subject to some extreme shocks and if it were not for the proactive approach and the pre-emptive steps that OPEC+ adopted, these shocks would have created havoc in oil markets like what we saw in other energy markets even before the crisis.”
“In face of a wide range of uncertainties, OPEC+ has no choice but to remain pro-active and pre-emptive. This is not an easy task especially since the market has the tendency to overreact to news in both directions and we have seen many ill-advised interventions in energy markets,” he noted.
“But again, the fact that OPEC+ can assess markets in an objective manner, its proactive approach and the cohesion within the Group put it in a better position to contribute to a more stable market.”
Moreover, Prince Abdulaziz said: “In all economic spheres from financial to commodities, credibility is a key ingredient to building the trust and confidence that lead to the stability of markets.”
“Without credibility, markets become more volatile and less attractive for all types of participants. The oil market is no different.”
“As OPEC+, we will not hesitate in handling any market situation. The more credible we are, the easier our task is in bringing stability to markets, and the more stability we bring, the greater our credibility is cemented and recognized,” declared the minister.
“This is a virtuous cycle that OPEC+ intends to maintain through objective and high-quality analysis and through keeping its focus on market fundamentals.”
