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Minister of Energy asserts withholding oil sales from countries with price restrictions and scaling back production

Al-Marsad Newspaper: His Royal Highness Prince Abdulaziz bin Salman bin Abdulaziz, Minister of Energy, held an interview with Energy Intelligence, during which he discussed the factors affecting the oil market trends and global economic estimates.

The following is the transcript of the interview:

Is it possible for OPEC Plus to change its decision and increase production?

Q 1: Last October, OPEC Plus decided to reduce production by 2 million barrels per day until the end of 2023. In light of the current developments in the macro economy and the oil market, in your view, is it possible for OPEC Plus to change its decision and increase production?

There are many factors that affect market trends, and it is estimated that the global economy will continue to grow this year and next, but there is still uncertainty about the pace of growth, in addition to that, China has recently begun the recovery phase after prolonged closures due to the virus pandemic. Corona, but the period required for recovery is still not clear.

The economic recovery causes inflationary pressures, and this may prompt central banks to intensify their efforts to control inflation.

And the overlap between these and other factors limits clarity, and the only reasonable course of action that can be followed in such an environment fraught with uncertainty is to maintain the agreement that we concluded last October for the rest of this year, and this is what we intend to do, as we must make sure that the positive indicators sustainable.

There are those who still believe that we may amend the agreement before the end of the year, and I tell them that they have to wait until Friday, December 29, 2023, to witness our full compliance with the current agreement.

Apply a cap to prices outside their current range

Q2: What is your opinion about reintroducing the NOPEC bill, and about the price ceiling and its potential effects on the oil market? Do you think a cap could be applied to prices outside their current range?

There is a big difference between the NOPEC bill and the expansion of price caps, but their potential impact on the oil market is similar. Such policies add new risks and greater ambiguity at a time when clarity and stability are most needed. And September, where she confirmed that such policies will inevitably exacerbate market instability and fluctuations and this will negatively affect the petroleum industry. On the other hand, OPEC Plus has made every effort and succeeded in achieving high stability and transparency in the oil market, especially compared to all other commodity markets. .

The NOPEC draft law does not take into account the importance of having a reserve of productive capacity and the consequences of not having this reserve on the oil market. The NOPEC bill weakens investments in oil production capacity, and it will also cause global supply to fall sharply below demand in the future, and the impact of this will be tangible all over the world. , in producing and consuming countries as well as in the petroleum industry.

This also applies to the price ceiling, whether it is imposed on a country or a group of countries, and on oil or any other commodity, as it will lead to an adverse reaction individually or collectively with unacceptable repercussions represented by large fluctuations and instability in the markets. Therefore, if a price cap is imposed on Saudi oil exports, we will not sell oil to any country that imposes a price cap on our supplies, and we will reduce oil production, and I will not be surprised if other countries take the same measure.

Reserve production capacity

Q3: Energy Intelligence estimates that the global production capacity reserve is about 2.5 million barrels per day, are you concerned about the production capacity reserve and what will the Kingdom do about it?

Reserve production capacity and global emergency stocks constitute a basic safety net for the oil market in the face of potential shocks. It has repeatedly warned that global demand growth will outpace the current level of global productive capacity reserves, at a time when emergency reserves are at an all-time low.

That is why it is important to implement policies that support the investments required to increase production capacity in a timely manner, and to maintain adequate and appropriate levels of global emergency stocks.

In Saudi Arabia, we have proactively expanded our production capacity to 13.3 million barrels per day by 2027. Work on this expansion is now in the engineering phase, and the first increment of this expansion is expected to become operational in 2025.

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