Saudi Energy Minister Prince Abdulaziz bin Salman told Bloomberg on Monday that OPEC+ production cuts could extend beyond March 2024 if the market requires it, criticizing commentators for failing to understand the output deal.
On November 30, eight members of the expanded cartel announced voluntary cuts of around 2.2 million barrels per day for the first-quarter of next year, including Saudi Arabia's current voluntary cuts of 1 million barrels per day, as well as Russia's 500,000 bpd voluntary cuts. That leaves us with "additional", "voluntary" cuts of less than 900,000 bpd not already been priced in. Additional voluntary cuts were pledged from Iraq, UEA, Kuwait, Kazakhstan, Algeria and Oman.
The market's reaction to the OPEC+ voluntary cuts announcement was a further decline in oil prices. According to Reuters, investors were bearish on the crude ahead of the OPEC+ meeting and had already priced in their anticipation that cuts would not be enough to move prices higher.
The Saudi energy minister has criticized the market's response to the OPEC+ announcement, accusing commentators of wanting to be "conspiratorial" and failing to understand the deal. The Saudi prince suggested that this would change once "people see the reality of the deal".
The prince emphasized that the 2.2 million in output cuts would be delivered.
"I honestly believe that the 2.2 million will overcome the usual inventory build that usually happens in the first quarter," he told Bloomberg, noting that "we wanted the market to know there would be a phased-in approach" because the cartel does cannot predict what the market situation will be in the first three months of the New Year. That required the cartel to "be careful about what language we use".
In other words, curbs on OPEC+ production will be phased out only after consideration of market conditions.
By Charles Kennedy for Oilprice.com
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