Prince Abdulaziz bin Salman bin Abdulaziz, Minister of Energy, gave an interview to Energy Intelligence, during which he discussed the factors influencing oil market trends and global economic estimates.
Below is a transcript of the interview:
Question 1: In October last year, OPEC Plus decided to cut production by 2 million barrels per day until the end of 2023. In light of current events in the macroeconomics and the oil market, in your opinion, can OPEC Plus cut production? change your mind and increase production?
There are many factors influencing market trends and it is estimated that the global economy will continue to grow this and next year, but there is still uncertainty about the growth rate, in addition to this, China has recently begun a recovery phase after prolonged shutdowns due to the pandemic. Corona virus, but the period required for recovery is still not clear.
The economic recovery is causing inflationary pressures, and this could prompt central banks to step up their efforts to control inflation.
And the overlap of these and other factors limits clarity, and the only reasonable course of action that can be taken in such an environment fraught with uncertainty is to keep the agreement that we made last October until the end of this year, and that is what we intend to to do, since we need to make sure that the positive indicators are sustainable.
There are those who still believe that we can amend the agreement before the end of the year, and I tell them that they need to wait until Friday, December 29, 2023, to make sure that we are in full compliance with the current agreement.
Question 2: What do you think about the re-introduction of the NOPEC bill, as well as the price ceiling and its potential impact on the oil market? Do you think it is possible to apply a cap 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 the same. Such a policy adds new risks and more uncertainty at a time when clarity and stability are needed most. And September, where she confirmed that such a policy will inevitably exacerbate market instability and fluctuations, and this will negatively affect the oil industry. On the other hand, OPEC Plus has made every effort and achieved high stability and transparency in the oil market, especially compared to all other commodity markets. .
The NOPEC bill does not take into account the importance of having a reserve of production capacity and the consequences of the absence of this reserve in the oil market. The NOPEC bill weakens investment in oil production capacity, and will also lead to a drop in world supply sharply below demand in the future, and the consequences of this will be felt around the world, in producing and consuming countries, as well as in the oil industry.
This also applies to a price ceiling, whether for a country or a group of countries, or for oil or any other commodity, as this would lead to an adverse reaction, individually or collectively, with unacceptable consequences of significant price fluctuations and volatility. 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 cut oil production, and I will not be surprised if other countries take the same measure.
Q3: Energy Intelligence estimates that the global spare capacity is about 2.5 million barrels per day. Are you concerned about capacity slack and what will the Kingdom do about it?
Spare production capacity and global buffer stocks provide a basic safety net for the oil market in the face of potential shocks. He has repeatedly warned that global demand growth will outpace the current level of global spare capacity at a time when emergency reserves are at an all-time low.
That’s why it’s important to have policies that support the investment needed to increase production capacity in a timely manner and maintain adequate and appropriate global emergency stock levels.
In Saudi Arabia, we have actively expanded our production capacity to 13.3 million barrels per day by 2027. Work on this extension is now in the design phase and the first phase of this extension is expected to be operational in 2025.