Saudi Arabia Says Will Not Sell Oil to Any Country That Imposes Price Cap on Its Supply

Energy Minister: Kingdom Embarked on Expanding Production Capacity to 13.3M b/d by 2027

Saudi Energy Minister Prince Abdulaziz bin Salman  -(File/AFP)
Saudi Energy Minister Prince Abdulaziz bin Salman -(File/AFP)
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Saudi Arabia Says Will Not Sell Oil to Any Country That Imposes Price Cap on Its Supply

Saudi Energy Minister Prince Abdulaziz bin Salman  -(File/AFP)
Saudi Energy Minister Prince Abdulaziz bin Salman -(File/AFP)

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."



Oil Pares Losses on Tight Supply but Cloudy Demand Caps Gains

FILE PHOTO: Pump jacks operate in front of a drilling rig in an oil field in Midland, Texas US August 22, 2018. Picture taken August 22, 2018. REUTERS/Nick Oxford/File Photo
FILE PHOTO: Pump jacks operate in front of a drilling rig in an oil field in Midland, Texas US August 22, 2018. Picture taken August 22, 2018. REUTERS/Nick Oxford/File Photo
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Oil Pares Losses on Tight Supply but Cloudy Demand Caps Gains

FILE PHOTO: Pump jacks operate in front of a drilling rig in an oil field in Midland, Texas US August 22, 2018. Picture taken August 22, 2018. REUTERS/Nick Oxford/File Photo
FILE PHOTO: Pump jacks operate in front of a drilling rig in an oil field in Midland, Texas US August 22, 2018. Picture taken August 22, 2018. REUTERS/Nick Oxford/File Photo

Oil prices inched higher on Wednesday underpinned by signs of near-term supply tightness but held near their lowest in two weeks, a day after OPEC downgraded its forecast for global oil demand growth in 2024 and 2025.
Brent futures rose 14 cents, or 0.2%, to $72.03 a barrel by 0745 GMT, while US West Texas Intermediate (WTI) crude futures gained 13 cents, or 0.2%, at $68.25.
"Crude oil prices edged higher as tightness in the physical market offset bearish sentiment on demand. Buyers in the physical market have been particularly active, with any available cargoes being snapped up quickly," ANZ analysts said in a note.
But falling demand projections and weakness in major consumer China continued to weigh on market sentiment, said Reuters.
"We may expect prices to consolidate around current levels for longer," said Yeap Jun Rong, market strategist at IG, adding the recent attempt for a bounce was quickly sold into.
"The absence of a more direct fiscal stimulus out of China has been casting a shadow on oil demand outlook, coupled with the prospects of higher US oil production with a Trump presidency and looming OPEC+'s plans for an output raise," Yeap added.
In its monthly report on Tuesday, the Organization of Petroleum Exporting Countries (OPEC) said world oil demand would rise by 1.82 million barrels per day (bpd) in 2024, down from growth of 1.93 million bpd forecast last month, mostly due to weakness in China, the world's biggest oil importer.
Oil prices settled up 0.1% on Tuesday following the news, after falling by about 5% during the two previous sessions.
OPEC also cut its 2025 global demand growth estimate to 1.54 million bpd from 1.64 million bpd.
The International Energy Agency, which has a far lower view, is set to publish its updated forecast on Thursday.
"The re-election of former President Trump is unlikely to materially affect oil market fundamentals over the near term, in our view," Barclays analysts wrote.
"Drill, baby, drill: this is likely to underwhelm as a strategy to drive oil prices materially lower over the near term" given that the stock of approved permits actually rose under the Biden administration, the analysts said.
However, markets would still feel the effects of a supply disruption from Iran or a further escalation between Iran and Israel, according to Barclays.
Donald Trump's expected secretary of state pick, US Senator Marco Rubio, is known for his hardline stance on Iran, China and Cuba. Tighter enforcement of sanctions on Iran could disrupt global oil supply, while a tougher approach to China could further weaken oil demand in the world's largest consumer.
Two US central bankers said on Tuesday that interest rates are acting as a brake on inflation that is still above the 2% mark, suggesting that the Federal Reserve would be open to further interest rate cuts.
The Fed cut its policy rate last week by a quarter of a percentage point to the 4.50%-4.75% range. Interest rate cuts typically boost economic activity and energy demand.
US weekly inventory reports have been delayed by a day following Monday's Veterans Day holiday. The American Petroleum Institute industry group data is due at 4:30 p.m. EST (2130 GMT) on Wednesday.
Analysts polled by Reuters estimated on average that crude inventories rose by about 100,000 barrels in the week to Nov. 8.