Saudi energy minister says oil supply cuts are not about ‘jacking up

Saudi Arabia’s energy minister said Riyadh and Moscow’s decision to extend crude oil supply cuts is not about “jacking up prices,” as Brent futures hover near $95 a barrel and analysts predict further rises into triple digits.  

“We can reduce more, or we can increase, that has been a subject that we want to make sure that the messaging is clear, that it’s not about, again, this jacking up prices,” Saudi Energy Minister Prince Abdulaziz bin Salman said Monday at the World Petroleum Congress in Calgary.

“It’s about … making the decision at the right time, when we have the data, and when we have the clarity that would make us in much more of a comfort zone to take that decision.”

Some members of the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, are implementing 1.66 million barrels per day of combined voluntary declines — which falls outside of unanimously agreed OPEC+ policies — until the end of 2024. Topping this, Saudi Arabia and Russia announced they will apply respective voluntary declines of 1 million barrels per day of production and 300,000 barrels per day of exports until the end of the year.

Saudi Arabia is the world’s largest seaborne oil exporter and relies on hydrocarbon revenues to support so-called giga-projects designed to diversify its economy.

Shrugging off the inertia of the first half of the year, oil prices have gained ground amid supply cut announcements in recent months, as the market braces for a potential volume deficit in the latter part of 2023. Ice Brent crude futures with November delivery were trading at $95.00 per barrel at 9:19 a.m. London time Tuesday, up 57 cents per barrel from the Monday close price. Front-month October Nymex WTI futures were at $92.65 per barrel, up $1.17 per barrel from the Monday settlement. The increases have rallied some analysts around speculation of a short-term return to oil prices at $100 per barrel.

Asked on the possibility of hitting that threshold, Chevron CEO Mike Wirth on Monday admitted oil prices could cross into triple digits in a Bloomberg TV interview.

“Sure looks like it. We’re certainly moving in that direction. The momentum, you know, supply is tightening, inventories are drawing, these things happen, gradually you can see it building. And so I think, you know, the trends would suggest we’re certainly on our way, we’re getting close,” he said, acknowledging an impact on the world economy. “I think the underlying drivers to the economy in the U.S. and frankly globally remain pretty healthy. I think it’s a drag on the economy, but one that thus far, I think the economy has been able to tolerate.”

Energy prices have repeatedly underpinned higher inflation in the months since the war in Ukraine and Europe’s gradual loss of access to sanctioned Russian seaborne oil supplies.