Saudi Arabia: cuts to production quotas could continue after March
Saudi Energy Minister Prince Abdulaziz bin Salman told Bloomberg on Monday that OPEC+ production cuts could extend beyond March 2024 if the market demands it, criticizing commentators for failing to understand the production deal.
On November 30, eight members of the enlarged cartel announced voluntary cuts of about 2.2 million barrels per day for the first quarter of next year, including Saudi Arabia's current 1 million barrel per day voluntary cuts and of Russia's 500,000 bpd. This leaves “additional” and “voluntary” cuts of less than 900,000 bpd not yet priced. Further voluntary cuts were promised by Iraq, UEA, Kuwait, Kazakhstan, Algeria and Oman.
The market reaction to the announcement of OPEC+'s voluntary cuts was a further decline in oil prices. According to Reuters, investors were bearish on crude ahead of the OPEC+ meeting and had already priced in the expectation that the cuts would not be enough to push prices higher.
The Saudi energy minister criticized the market reaction to the OPEC+ announcement, accusing commentators of being "conspiratorial" and failing to understand the agreement. The Saudi prince suggested that the situation will change when "people see the reality of the agreement" .
The prince stressed that the 2.2 million production cuts will be respected.
“I honestly believe that the 2.2 million will exceed the usual inventory buildup that usually happens in the first quarter,” he told Bloomberg, noting that “we wanted the market to know that there would be a phased approach” because the cartel cannot predict what the market situation will be in the first three months of the new year. This required the cartel to “be careful about the language we use”.
In other words, OPEC+ production limits will be gradually eliminated only after taking into account the conditions of the market, which, at this moment, does not seem to price the agreement or, simply, does not present a demand for oil sufficient to support the price, as WTI oil prices indicate
The price has only increased slightly compared to yesterday and in any case we are far from the highs reached in the last two months.
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The article Saudi Arabia: cuts to production quotas could continue after March comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/arabia-saudita-i-tagli-alle-quote-produttive-potrebbero-prosegurie-dopo-marzo/ on Tue, 05 Dec 2023 16:06:40 +0000.