Saudi Energy Minister Prince Abdulaziz bin Salman Al Saud speaks during a panel discussion at the 10th Arab-Chinese Business Conference in Riyadh, June 11, 2023.
Fayez Nourdin | AFP | Getty Images
Saudi Energy Minister Prince Abdulaziz bin Salman said on Wednesday the latest round of voluntary crude production cuts was a testament to the cooperation between heavyweight producers and allies Russia and Saudi Arabia.
On Monday, Saudi Arabia said it would extend until August a 1 million barrel-a-day production cut originally scheduled for July, while Russia announced it would cut exports by 500,000 barrels a day next month.
Some members of the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, first announced voluntary output cuts of 1.66 million barrels per day in April, before agreeing to extend them until the end of 2019. During the Union Ministerial Meeting in June 2024.
Unlike policy decisions within the OPEC+ alliance, voluntary production cuts do not need to be unanimously approved or implemented by all group members.
Prince Abdulaziz said of the latest Riyadh-Moscow deal on production cuts at an OPEC+ seminar in Vienna on Wednesday: “In the last move this week, yes, we are all continuing with voluntary production cuts, But again, that’s part of what we’ve done.” What we did with our colleagues from Russia was also to lessen the viewer’s cynical side of what’s going on in Saudi Arabia and Russia. “
Questions have arisen about the extent to which Russia will meet its commitment to voluntary crude oil output cuts given the continued opacity of Russian refinery consumption and seaborne exports – which have been no longer accepted in Europe since December and have been diverted to Asia. The Russian government has suspended the release of official statistics on oil, gas and condensate production until April 2024. According to the Russian state news agency TASS.
Implementing export cuts, rather than production cuts, would allow market participants who rely on independent third-party tracking data to verify the extent to which Russia is meeting its commitments.
“It’s a voluntary cut, it’s not imposed on them … including that they will do it from exports because it makes more sense,” Abdulaziz said on Wednesday.
In an interview with CNBC’s Dan Murphy in June, the Saudi energy minister said OPEC+ could “absolutely” trust Russia.
“But I’ve always loved a phrase from President Reagan, ‘Trust but verify,'” he said at the time, emphasizing the important role of independent sources in assessing yields. The OPEC+ group looks at guidance from seven separate so-called secondary sources when it investigates individual members’ compliance with their production commitments.
OPEC+ relations between Moscow and Riyadh appear to be good, an OPEC+ representative told CNBC on condition of anonymity due to the sensitivity of the discussions.
Brent Crude Oil Price Oil prices have so far hovered above the $75 a barrel mark, with announcements of voluntary output cuts offering little support amid broader demand focus and macroeconomic concerns over a potential global recession. Brent crude futures for September expiration were trading at $76.06 a barrel at 12:57 a.m. Vienna time, down 19 cents from their previous settlement.
Abdulaziz stressed that the Producers Union will continue to closely support the market.
“I’m going to adjust what (former ECB President Mario) Draghi said, we’re going to do whatever is necessary. Not at all costs, but whatever is necessary,” he said on Wednesday.