Saudi Energy Minister Prince Abdulaziz bin Salman defended the voluntary output cuts announced by some allied oil producers in April, which he noted were first criticized as likely to spike crude prices — then, as failing to support them.
On April 3, several producers of the Organization of the Petroleum Exporting Countries and its partners — collectively known as OPEC+ — revealed a combined 1.66 million barrels per day of production declines until the end of this year.
This Sunday, they extended these measures through the end of 2024, with Riyadh announcing an additional 1 million-per-day voluntary and extensible drop, starting in July. The OPEC+ group otherwise collectively decided to stick to its targets for 2023, with production at 40.463 million barrels per day next year.
The news comes after months of macro-economic concerns — including the collapse of several U.S. and European banks, a potential global recession, and a slower-than-expected recovery of Chinese demand — weighed on oil prices in the first few months of the year.
On Sunday, the Saudi oil minister defended the voluntary moves as precautionary.
“It was just our sensibility, if you will call it, that the environment was not sufficiently allowing confidence to be there. So taking a precautionary measure tends to put you on the safe side. And it is part of the typical rhythm that we have installed in OPEC, which is being proactive, being preemptive,” Abdulaziz told CNBC’s Dan Murphy.
“That tool is with us. It doesn’t mean we have certainty that things will go sour or left or right.”
He noted that critics of the April voluntary cuts had accused OPEC+ of seeking to increase prices which would in turn stoke inflation — and then later “pedaled back again and said OPEC+ action failed to [rise] prices.”
The alliance has found itself repeatedly at odds with international consumers. The U.S., for instance, has proved a vocal critic, citing concern for the strain on households that are already battling high prices.
Abdulaziz also said he thinks the long-term framework changes agreed at Sunday’s OPEC+ meeting will lead to fairer quota-setting among producers who have increased or depleted their spare capacity.
OPEC+ now intends to have three independent analysts — IHS, Wood Mackenzie and Rystad Energy — study the individual capacity of each OPEC+ member, with an eye to inform their baselines — the starting level from which producers cut their output.
“Hopefully by mid-year next year, we will have new baselines and a way forward that makes it more equitable, more fair for everybody to assign for them production levels that is going to be commensurate with their capacities in the most transparent way,” the energy minister said.
Asked if the group can trust ally Russia, whose export levels have been opaque since the implementation of Western crude and oil product sanctions, Abdulaziz added: “Absolutely. But I always like [the] President [Ronald] Reagan line, ‘Trust but verify,'” noting the instrumental role of independent sources in assessing production.