Saudi Arabia to stick with OPEC+ quota despite shortfall from other producers
Saudi Arabia does not plan to pump more crude beyond its quota to make up for other OPEC+ members’ production shortfalls, the kingdom’s energy minister, Prince Abdulaziz bin Salman, said Jan. 17, despite increasingly tight spare output capacity among the group.
OPEC and 10 allies are hoping to restore their production to pre-pandemic levels by late 2022 through a series of monthly 400,000 b/d production hikes, but not all members are likely to get there, having already hit their maximum output levels or come close to it.
That has raised doubts about the OPEC+ alliance’s ability to keep markets amply supplied and led to speculation other members with sufficient spare capacity — namely Saudi Arabia and the UAE — would have to step in to keep the market well-supplied.
“We have an OPEC+ agreement, and I have to honor my colleagues and my friends,” Prince Abdulaziz told S&P Global Platts in Dubai on the sidelines of a conference.
However, UAE energy minister Suhail al-Mazrouei said at the conference that OPEC+ alliance would ensure no supply squeeze in the market to maintain stable prices.
OPEC+ countries will remain “a reliable supplier of hydrocarbons, supplying the world with its requirements when some other countries that used to be major suppliers are lagging behind because of natural decline,” Mazrouei said.
Platts estimates the 19 OPEC+ members with quotas pumped some 620,000 b/d below their combined caps in December.
That, along with the apparent resilience of global oil demand to the omicron variant, has some analysts predicting oil prices could hit $100/b or more in 2022, escalating policymakers’ fears of heightened inflation that could derail the economic recovery from the pandemic. Dated Brent has risen more than 27% over the last month to $87.72/b as of Jan. 17.
Iran happy with $80-$90/b
OPEC+ ministers next meet Feb. 2 to decide on their March production levels.
Asked about OPEC+ members’ underperforming their production targets, Prince Abdulaziz brushed aside the question, saying: “Concern is not in my vocabulary.”
He made a similar comment earlier in the day to reporters that had been interpreted by some as his view on current oil prices, but a ministry spokesman later clarified to Platts that Prince Abdulaziz was speaking generally about his overall state of mind.
Officials in the US — the largest consumer of oil — have said they are keeping a close eye on rising energy prices, having held talks with OPEC+ officials before the alliance’s past couple of meetings and previously urged the producer group to exceed its quotas.
Prince Abdulaziz declined to reveal whether he has been in recent conversation with US officials over oil production volumes, telling reporters: “This is something we keep to ourselves.”
His comments came two days after Iran’s oil minister Javad Owji said that oil prices of $80-$90/b are “favorable” as the country eyes almost $30 billion from crude sales in its next year starting in March.
“In my opinion and considering that of experts… the price around $80-$90/b is favorable. OPEC members look at this range too,” Owji said, according to a report by the oil ministry news service Shana.
Iranian lawmakers that are discussing the government-proposed budget bill said Jan. 15 that the country expects to earn $29.8 billion in oil revenue in the year that starts on March 21. The budget sales forecast translates into an oil price forecast for the country’s crude at $68/b.