Saudi Arabia said oil producers shouldn’t take the rise in prices for granted because the coronavirus pandemic could still hit demand.
“We are not yet out of the woods,” Prince Abdulaziz bin Salman said to Bloomberg Television in Riyadh on Saturday. “We need to be careful. The crisis is contained but is not necessarily over.”
The Organization of Petroleum Exporting Countries and its allies, including Russia, have been under pressure from major consumers to accelerate supply increases following the group’s deep cuts last year as the virus spread. Oil has soared around 70% in 2021 as economies recover, and Brent crude’s now above $85 a barrel.
Iraq, one of OPEC+’s biggest producers, said Wednesday that prices could hit $100 a barrel in the first half of next year.
The calls from importers such as the U.S., Japan and India have become louder in recent weeks as shortages of natural gas and coal push prices in those markets to record levels.
OPEC+ is raising daily production by 400,000 barrels each month, and has resisted pressure to do more. The oil market’s tightness has been exacerbated by some members failing to reach their output quotas.
The cartel meets on Nov. 4 to decide whether to stick with its strategy.
The Saudi minister said more barrels from OPEC+ would do little to curb costs of gas in Europe and Asia or gasoline in the U.S.
Prince Abdulaziz said oil demand may increase by 500,000-600,000 barrels a day -- or 0.5% of global consumption -- if the Northern Hemisphere’s winter is colder than normal and power companies switch from gas to crude. Any further boost to demand may be limited because most gas-fired power generators cannot easily use oil, which is also a far dirtier fuel.
Inventories Up
There could be a “huge uplift” in global oil inventories in 2022, the minister said, justifying his caution. Global travel was still subdued, he said.
“We don’t take things for granted, we still have Covid,” he said. “We still have jet fuel limited in terms of growth. If you do more now, you’re accelerating the problem.”
His predictions on supply and demand for next year are similar to those of many energy traders and Wall Street banks. JPMorgan Chase & Co. forecasts the daily supply balance in global oil markets will shift to a surplus of 1 million barrels by March from a deficit of around 1.5 million barrels now.
The prince’s comments were echoed earlier by fellow OPEC+ member Azerbaijan. Energy Minister Parviz Shahbazov said in an interview the cartel’s policy was appropriate, given the global economy’s slow recovery from the pandemic.
“We have agreed on a very wise and smart program for the months to come,” he said. “The OPEC+ agreement brings additional stability to the global-production balance.”
There could be a “huge uplift” in global oil inventories in 2022, the minister said, justifying his caution. Global travel was still subdued, he said.
“We don’t take things for granted, we still have Covid,” he said. “We still have jet fuel limited in terms of growth. If you do more now, you’re accelerating the problem.”
His predictions on supply and demand for next year are similar to those of many energy traders and Wall Street banks. JPMorgan Chase & Co. forecasts the daily supply balance in global oil markets will shift to a surplus of 1 million barrels by March from a deficit of around 1.5 million barrels now.
The prince’s comments were echoed earlier by fellow OPEC+ member Azerbaijan. Energy Minister Parviz Shahbazov said in an interview the cartel’s policy was appropriate, given the global economy’s slow recovery from the pandemic.
“We have agreed on a very wise and smart program for the months to come,” he said. “The OPEC+ agreement brings additional stability to the global-production balance.”
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