London — The OPEC+ alliance's conservativeness in maintaining tight control over oil supply has been "proven right," Saudi energy minister Prince Abdulaziz bin Salman said April 1, urging his counterparts to stay disciplined in their mission to bring the market back to its pre-pandemic health.
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"Until the evidence of recovery is undeniable, we should maintain this cautious stance," he said in his opening remarks to the OPEC+ meeting. "The global picture is far from even and the recovery is far from complete."
But he also said the group would remain flexible and acknowledged that the market had gained "stable footing" due to the OPEC+ cuts to date, with the group's current quota compliance a collective 113%.
While the US and UK are seeing positive results from their mass vaccinations, the EU was still struggling with rising COVID-19 infection rates, he noted.
"Steering the ship in these current conditions where different scenarios are playing out in various regions of the world requires a steady hand on the tiller," he said. "It also requires flexibility and being responsive to market needs."
OPEC and a group of allies led by Russia are meeting to set production levels for May and possibly beyond.
The group is currently committed to hold back about 7 million b/d of production through the end of April, with Saudi Arabia adding an extra voluntary 1 million b/d cut on top, to bolster the market as it recovers from the pandemic.
S&P Global Platts assessed Dated Brent at $63.75/b on March 31, 81 cents/b lower than the price just before the last OPEC+ meeting March 4, when the alliance surprised the market by maintaining its cuts, except for slight rises granted to Russia and Kazakhstan.
The meeting convened just after Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman spoke on the phone, though a Kremlin readout of the call did not mention whether they discussed oil production policy.
Key OPEC+ members, including Saudi Arabia, would prefer to extend their current output quotas through at least May, sources involved in the talks have told S&P Global Platts.
But Russia has asked for another small increase in its quota, and ministers have also feuded over the lack of compliance by some members, the sources said.
Under the terms of its pact, the alliance can adjust output caps by up to 500,000 b/d each month.
Russian Deputy Prime Minister Alexander Novak said in his opening remarks at the meeting that the goal of the coalition is not to overheat the market by withholding too much production but also preventing an oversupply.
He estimated that global oil demand would rebound by between 5 million to 5.5 million b/d in 2021, which is actually less than the 5.6 million b/d estimated by the OPEC secretariat.
The oil market was currently in a 2 million b/d deficit, he said, which has resulted in OECD oil stocks falling to 50 million to 60 million barrels above the targeted five-year average, he said.
"The vaccination campaign and rollout of new vaccines is yielding results, [and] gives us a lot of optimism and hope for the future," said Novak, who leads Russia's OPEC+ delegation. "At the same time, we have to be very careful and monitor new waves of the virus and possible new lockdowns."
Prince Abdulaziz also spoke to US Energy Secretary Jennifer Granholm on the phone before the meting, with Granholm tweeting that they agreed to "reaffirm the importance of international cooperation to ensure affordable and reliable sources of energy for consumers."
It is believed to be the first call by a Biden administration official to Saudi Arabia to discuss oil prices and continues a tradition of US presidents prodding the kingdom to keep the market supplied to their liking, despite the current White House's perceived antipathy towards the industry.
The US remains the world's largest consumer of oil.