Saudi Energy Minister Prince Abdulaziz bin Salman indicated on Wednesday that "the new joint oil production cuts announced by Russia and Saudi Arabia earlier this week have once again proven the skeptics regarding Saudi-Russian energy relations wrong." He stated, "What we have done in collaboration with our colleagues in Russia aims to alleviate skepticism about what is happening between Saudi Arabia and Russia in this regard."
The OPEC+ alliance includes the Organization of the Petroleum Exporting Countries (OPEC) and allies, including Russia, and accounts for about 40% of the world's total crude oil production. The alliance began reducing oil production in November to address weak prices.
On Monday, both Saudi Arabia and Russia, the world's two largest oil-exporting countries, announced additional cuts to their oil supplies in an attempt to boost prices. However, this move only temporarily supported the market. On Wednesday, Brent crude futures fell more than one percent to $75.30 a barrel, below the $80-$100 per barrel range that most OPEC countries need to balance their budgets.
OPEC states that it does not target a specific oil price but seeks to balance the oil market in a way that benefits both consumers and producers. The United States, the largest oil producer outside the OPEC+ alliance, has repeatedly urged the group to increase production to support the global economy and criticized Riyadh's cooperation with Moscow following Russia's invasion of Ukraine.
The International Energy Agency has predicted a tightening of the oil market in the second half of 2023, attributing this to reductions in OPEC+ production.
Analysts from Morgan Stanley today lowered their oil price forecasts, stating that despite expectations for a decline in inventories in 2023, their estimates indicate a surplus in the first half of 2024 as supply from outside OPEC grows faster than demand.
Emirati Energy Minister Suhail al-Mazrouei told reporters on Wednesday that the additional cuts are sufficient to balance the oil market. He added, "This latest additional production cut is enough to assess the market's balance."
Al-Mazrouei stated that the UAE would not participate in any new production cuts, as it is already producing significantly below its capacity. He noted, "There is a larger issue... I see a lack of investment in many countries. Perhaps we need to invite new members to join the group. The more countries we have... the easier our job will be... to ensure the world has enough oil in the future." He concluded, "I believe if we had 60 or 80 percent of the producers within the alliance... we would certainly do a better job."
