Energy leaders leave door open to more cuts as virus spikes
DUBAI – The Saudi Arabia Minister on Energy on Monday said that global energy producers can tweak a production cuts agreement which could be extended by 2022, an anticipation of continuing weakened demand for oil as coronavirus pandemic spikes in Europe and the United States. Saudi Arabia's Energy Minister said on Monday
"With Prince Abdulaziz bin Salman at an ADIPEC energy conference sponsored by Abu Dhabi, which will be held almost this year, OPEC has been proactive and continues to be proactive.
Prince Abdulaziz said: "We maintain our flexibility, without specifically committing ourselves to the future 7.7 million barrels of oil per day or more.
"I'm not putting policies in front of everyone's reach," he said.
In April, Saudi Arabia-led OPEC Oil Cartel and non-OPEC countries, including Russia, agreed to reduce up to ten million barrels of crude oil a day, or a tenth of global supply, by July, to prevent the oil prices from sinking into a decline in demand for crude oil.
The so-called OPEC+ agreement was aimed at easing these cuts to 7.7 million barrels per day by year-end and almost 6 million barrels per day by 16 months from January.
The energy minister of the United African Emirates Suhail al-Mazrouei reaffirmed that the agreement had been working.
"We showed as a group too how disciplined we were," he said.
On November 17, countries of OPEC+ are meeting again, but no guarantee existed, as some countries are losing revenue in the context of existing production quotas, will be able to agree on deeper cuts in 2021.
On Monday Brent, the international standard, traded approximately $40 a barrel. US benchmark crude was traded in just about $38 a barrel. The virus reduced the oil prices and affected key revenue from oil-producing nations.
There is little guarantee that a rebound with big European cities will be implemented due to alarming spikes in new cases of coronavirus in advance of the winter and flu seasons.
Prince Abdulaziz said the present accord can always be tweaked while hoping that a vaccine can mitigate the virus and help the world regain a sense of mobility.
"We took into account the April agreement what might happen and decided to prepare itself proactively for the worst," he said.
A new US administration led by President Joe Biden could also have an impact on demand for oil, especially if it can reinvigorate the economy and control the outbreak of COVID-19 in the United States, which in recent weeks have reached record highs.
Biden may have an impact on the fuel markets, too, if he is able to push through an incentive package that increases consumer spending or if he is able to cool the trade war with China and re-enter with Iran, which could lead to the lifting of sanctions on Iranian oil exportations.
Prince Abdulaziz said that nations producing energy are going to handle anything and that in the past OPEC, to which Iran is a party, has successfully managed to deal with retrofitting.
OPEC Secretary-General Mohammad Barkindo expressed optimism for the future of oil and said that although the prediction for next year has been reduced by nearly 9.8 million barrels of oil a day by 2020.
He said, adding that OPEC+ countries have been complying with the cuts since May. "No cause for alarm," he added.
Sultan al-Jaber has said, at the height of lock-downs in March and April, the world has consumed another 75 million barrels of petroleum per day. According to him, oil demand dropped to just under 90 million barrels a day over 12 weeks.
"We know that, when all this is done, the world will still need oil and gas," he said.
"We hope that demand for oil by 2030 will increase to more than 105 million barrels a day."
Russian Deputy Energy Minister Pavel Sorokin, however, struck more sober tone, said that he does not expect a full air travel resumption until two years later.
Although the demand for oil is expected to grow during the next decade, he said that it would take 2 to 3 years to reach 100 million barrels a day or so again.
He was speaking in Russian media and reported that the long-term energy minister of the country Alexander Novak had been recommended for promotion in his position as deputy prime minister.