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Saudi Arabia says still committed to OPEC+, despite Russian dallying on oil cuts

Highlights

Minister says report of Saudi break from group 'nonsense'

OPEC+ to meet March 5-6 to discuss output policy

Russia yet to heed Saudi lobbying for deeper oil cuts

London — Saudi Arabia remains committed to the OPEC+ alliance with Russia and other key oil producers, the kingdom's energy minister said Friday, rejecting a report that it was considering a pause in its cooperation with the group.

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"We are in continuous communication and dialogue with all our OPEC and OPEC+ partners," Prince Abdulaziz bin Salman told S&P Global Platts.

The Wall Street Journal reported earlier Friday that Saudi Arabia could take a break from the OPEC+ alliance, given Russia's reluctance to commit to deeper production cuts to combat the coronavirus' impact on global oil demand.

The report added that Saudi Arabia, Kuwait, and the UAE were discussing a joint output cut of 300,000 b/d independent from the group.

The prince referred to a statement he gave Reuters describing the report as "absurd and utter nonsense," when contacted by Platts.

A Gulf delegate also described the report as "strange" and "not true," while another Gulf delegate also said it was "not true." Two non-Gulf delegates said they had not heard of such deliberations.

The 23-country OPEC+ coalition is set to meet March 5-6 in Vienna to decide on the future of their current 1.7 million b/d production cut accord, with Saudi Arabia having heavily lobbied to deepen the cut to offset the expected demand hit from the coronavirus outbreak.

Prince Abdulaziz on Wednesday described the oil market as like a house on fire that called for firefighters to attack the blaze, not a garden hose, according to sources present at a closed-door international energy symposium in Riyadh.

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An advisory committee of delegates co-chaired by Saudi Arabia and Russia recommended February 7 an additional cut of 600,000 b/d for the second quarter, but Russian energy minister Alexander Novak is yet to be fully convinced of the need for such measures, citing the uncertainties of demand forecasts. The prince and Novak spoke by phone earlier this week.

Many analysts say they expect Russia to eventually sign on to some kind of output curbs, if not the exact committee recommendation, given the country's history of waiting until the last minute to commit to extract additional concessions.

"It would not surprise me that they are upset that the Russians still haven't said anything publicly yet," said one source, referring to the Saudis, who requested anonymity because of the sensitivity of the discussions.

Russia's energy minister could not immediately be reached for comment.

Saudi Arabia and Russia forged the OPEC+ coalition in late 2016, instituting production cuts starting in 2017 to end a brutal three-year market share battle. The group formalized its alliance by signing a charter in mid-2019 calling for permanent cooperation and dialogue on oil market management, although it did not bind any member to future production cuts or quotas.

OPEC's analysis arm last week revised downward its forecast of 2020 global oil demand growth by 230,000 b/d due to the virus outbreak, while the International Energy Agency was far more bearish, estimating a 365,000 b/d erosion of its previous demand growth projection.

Platts Analytics has reduced its Chinese oil demand forecast by 2.9 million b/d for February, with the expectation that Chinese refiners will slash crude runs in the month by 2.6 million b/d.

Front-month ICE Brent futures were trading down 1.69% to $58.31/b at 1722 GMT but have recovered 9.4% from their 2020 low February 10 on indications the infection may be gradually coming under control.