Opec’s leader defends massive oil production cuts, compares them to actions of central banks, as oil prices surge to a new 10-month high.
Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman, defended the Opec+ cuts, as Brent crude oil prices approached $95 per barrel.
Oil prices have risen by over 30% since late June and are now at their highest level since November 2022, thanks to the extended supply cuts implemented by Saudi Arabia and Russia.
In a surprise move earlier this month, Saudi Arabia, leading the Organisation for Petroleum Exporting Nations (OPEC), decided to extend its 1 million barrels per day supply cut until the end of the year, which started in July.
Russia, a member of the extended Opec+ group and the second-largest oil exporter globally, also extended its 300,000 barrels per day export cut until the end of the year.
Speaking at the World Petroleum Congress in Calgary, Prince Abdulaziz bin Salman compared the cuts to central banks’ efforts to control inflation, describing them as “benign” and aimed at reducing market volatility.
He denied that the supply cuts were meant to inflate prices and instead argued that they were a response to the uncertainty surrounding future demand, with interest rate hikes impacting the global economy and the outlook for economic growth in Europe and China becoming increasingly bleak.
However, in its own analysis last week, OPEC projected a significant oil shortfall of 3.3 million barrels per day over the next three months, as global demand surpasses supply.
Analysts have warned that oil prices are likely to exceed $100 per barrel soon.
Bjarne Schieldrop, the chief commodities analyst at Saxo Bank, described the growth in prices since late June as “relentless” and predicted further increases.
“Saudi Arabia, together with Russia, currently has solid control over the oil market,” said Mr. Schieldrop. “It is highly likely that dated Brent will surpass $100 per barrel. It is now less than $5 per barrel away from that level, and it only needs a little push to go above it.”
Mr. Schieldrop also noted that some measures of oil prices have already exceeded $100, pointing to Tupis crude oil in Asia, which traded at $101.3 per barrel last week.
According to Mr. Schieldrop, the continued restraint from Russia and Saudi Arabia resulted in a decrease of 23 million barrels in crude stocks across the US, major EU nations, and Japan in August.
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