US President Donald Trump's request for unrestricted supply and Russia’s reluctance to go all the way with curbs were behind the move
Saudi Arabia endorses moderate trims to oil supply at Opec meeting
Saudi Arabia has endorsed a moderate oil production cut that will see Opec and its allies slash around a million barrels per day of crude so as not to upset the markets too much and also placate the US President who asked the producers’ not to restrict supply.
"We in the kingdom are going to be advocating something adequate to balance the market,” Saudi energy minister Khalid Al Falih said at the opening of the meeting of the exporters’ group in Vienna on Thursday.
“We don’t want to shock the market,” he added, noting that cutting about a million barrels per day for the whole group should be adequate.
The Saudi Arabian endorsement of moderate curbs comes amid reluctance of main ally Russia to make substantial cuts, and pressure from the US President Donald Trump to push prices lower.
Mr Trump tweeted ahead of the Vienna meeting that "hopefully Opec will be keeping oil flows as is, not restricted. The World does not want to see, or need, higher oil prices!”
He had tweeted during the price crash that he wanted the prices to go lower, calling it a “tax cut for America and the world”.
Brent oil prices, which lost 30 per cent of their value last month after climbing as high as $86 per barrel in October, needed a harsher cut of more than one million bpd to recoup some of the losses, according to analysts.
UAE Energy Minister Suhail Al Mazrouei said he was worried about inventory build-up next year amid plenty of supply in the market.
“I’m hopeful that everyone in and even outside the organisation will be supportive to whatever requirements we need to do to balance the market,” he said. “The objective is to balance the market and currently we have seen that there’s a requirement for an adjustment.”
Analysts had widely anticipated Opec to take a more diplomatic stand at Thursday’s meeting, with the group signalling to the markets that a rollback of supply was in order, without being too forthcoming, for fear of upsetting Mr Trump.
“The increasingly bipolar relationship between Saudi Arabia and the US makes it extremely difficult for the Saudis to announce a cut even if it [along with the GCC and Russia] decides to remove the volumes they have put into the market since May - around 1.5 million bpd,” London-based consultancy Energy Aspects said in a note.
It is unclear for now how much each country is willing to cut, particularly Russia, which has been less enthusiastic for production limits than in 2016, when the group along with its allies collectively agreed to reduce output by 1.8 million bpd starting January 2017, with an extension through to May this year.
It also remains unclear for how long the current production restrictions will remain in place. The signals from Vienna indicate that Saudi Arabia is not likely to shoulder the burden alone and will be looking at a collective participation, with no exemptions. However, Libya, which had sought an exemption in 2016, said it was hopeful of procuring one, while Iranian oil minister Bijan Zanganeh said Tehran was unwilling to cut when it was still under US sanctions.