OPEC+ Squeezes Oil Production Tight to Protect Price Recovery - Bloomberg

OPEC+ Squeezes Oil Production Tight to Protect Price Recovery - Bloomberg

Saudi Arabia and its OPEC+ allies shocked the oil market with a decision to keep supply in check, sending prices surging and adding inflationary pressure to the global economy as it emerges from the pandemic.

One year on from the outbreak of a bitter price war that sent crude below zero, the kingdom showed that its priority is preserving the hard-won oil recovery rather than worrying about tightening the market too much.

“I don’t think it will overheat,” Saudi Energy Minister Prince Abdulaziz bin Salman told reporters after Thursday’s meeting. Last year “we suffered alone, we as OPEC+” and now “it’s about being vigilant and being careful,” he said.

The Organization of Petroleum Exporting Countries and its allies had been debating whether to restore as much as 1.5 million barrels a day of output in April. From trading houses in Geneva to Wall Street banks, much of the oil world was in agreement that global markets could use some more barrels to temper a rapid run-up in prices.

But after being urged to “keep our powder dry” by Prince Abdulaziz, OPEC+ members agreed to hold steady at current levels -- with the exception of modest increases granted to Russia and Kazakhstan. Saudi minister went one step further, saying the additional 1 million barrel-a-day voluntary production cut the kingdom introduced last month was now open ended.

That means the cartel will still be withholding about 7 million barrels a day from the market -- equivalent to about 7% of global demand -- even as fuel consumption recovers in many countries.