Three days after Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman sent crude prices surging with an agreement to extend cooperation on oil, the kingdom’s top energy official made clear that the terms of a deal remain unresolved.
In an interview with Bloomberg, Saudi Energy Minister Khalid Al-Falih said he saw an oversupplied market, but cautioned that all the members of the OPEC+ group, which includes allies such as Russia and Kazakhstan, needed to come together for a cut to go ahead.
Moscow backs output curbs “in principle,” but it’s “premature” to say what they will agree in Vienna this week, Al-Falih said. He also walked back previous statements about the size of any supply reduction, saying the group is likely to cut but still needs to “figure out what needs to be done and by how much.”
Oil prices pared gains after his comments, which were less bullish than previous statements and signaled that divisions with Russia remain unresolved. Crude was trading 2.5 percent higher at $54.29 a barrel in New York, compared with an earlier increase of as much as 3 percent.
“We need to get together and listen to our colleagues, hear about their views on supply and demand and their projections of their own countries’ production,” Al Falih said in an interview while attending United Nations climate talks in Katowice, Poland.
Wait and See
His comments were less definitive than those made in Abu Dhabi last month, when he said the group should consider reducing production by 1 million barrels a day.
“What we said in Abu Dhabi is that projections are that there will be 1 million barrels a day of oversupply, and that we will wait until we get to Vienna and are certain what that number is,” he said. “The next road to cross is whether all countries are willing to come on board and contribute to that cut.”
OPEC, Russia and other allies meet in Vienna later this week to decide production policy for 2019. There’s consensus the so-called OPEC+ group needs to rein in production to prevent global inventories growing next year, but no agreement on the details.
Oil suffered the largest one-month drop in November since the global financial crisis in 2008. The 20 percent plunge was driven by a combination of rising supply from U.S. shale regions, Saudi Arabia and Russia, slower demand growth and American waivers on oil sanctions on Iran. Brent crude, which hit a four-year high above $86 a barrel in early October, traded on Tuesday at about $63 a barrel.
Saudi Arabia and Russia, the world’s two largest exporters, have agreed to continue their cooperation into next year, Putin said at the weekend after meeting Prince Mohammed in Buenos Aires. But Saudi and Russian officials still differ on how to share the burden of any cuts, people familiar with discussions said yesterday.
Moscow wants to reduce by a maximum of 150,000 barrels a day, but with OPEC estimating global oversupply at more than 1 million barrels a day, Riyadh wants the burden shared more evenly. Both countries are pumping near-record amounts of oil in excess of 11 million barrels a day each.
President Donald Trump is complicating deliberations. He’s waged a Twitter campaign against OPEC, demanding oil producers keep pumping to bring down gasoline prices for U.S. consumers. Saudi policymakers may be reluctant to go against Trump after the murder of Jamal Khashoggi unleashed a fusillade of criticism from American lawmakers, leaving the president as one of Prince Mohammed’s few remaining allies in Washington.