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Saudi energy minister Prince Abdulaziz bin Salman delivered a stark warning to his OPEC+ counterparts, urging the coalition to stay disciplined with their crude production or risk upending the oil market’s recovery fostered by their historic output cuts since May.
“Now as we see light at the end of the tunnel, we must avoid at all costs the temptation to slacken off our cause,” he said in opening remarks at the OPEC+ coalition’s Jan. 4 meeting. “Do not put at risk all we have achieved for an instant illusionary benefit.”
OPEC and its allies are meeting to set crude production levels for February.
The alliance, now convening monthly, is already easing its production quotas by 500,000 b/d for January and delegates said some countries, including Russia, are pushing for another 500,000 b/d increase in February to take advantage of current prices.
But most members favor staying the course, citing the emergence of new virus strains and the slow deployment of coronavirus vaccines, delegates told S&P Global Platts.
Prince Abdulaziz, who strongly advocated for continued production restraint at the last OPEC+ meeting to prevent prices from backsliding, said that demand for automotive fuels was still fragile and noted that the surge in COVID-19 cases has many countries scrambling to impose renewed lockdown measures.
“I want to urge caution even in this general optimistic environment,” he said.
Russian Deputy Prime Minister Alexander Novak, his country’s primary OPEC+ envoy, acknowledged the uncertainty in the global economy but said he is looking forward to a full oil market recovery in 2021.
“I hope that we will gradually, using different instruments and mechanisms, take the correct decisions to balance the market,” he said in his opening remarks.
In an earlier interview with Russian business channel RBC, Novak said oil demand was still 6 million to 7 million b/d below pre-pandemic levels but that the oil market’s prospects had much improved in recent months.
“Now the situation is more defined than it was in the second quarter,” he said. “Vaccinations have begun. If all develops positively and population mobility improves, in motor vehicles, air travel, then we will look even more optimistically at the market. I hope that sometime in 2021 demand will return to close to the level it was at before the crisis.”
The OPEC+ group, which controls roughly half of global crude production capacity, was scheduled to relax its 7.7 million b/d in collective cuts to 5.8 million b/d in January, but a week of intense talks leading up to its Dec. 3 meeting resulted in a deal to scale them back much more modestly to 7.2 million b/d.
Ultimately, the goal is to get the cuts down to 5.8 million b/d by mid-year, in up to 500,000 b/d monthly increments, as market conditions warrant.
