OPEC and its allies would only ease supply curbs and pump more oil once global crude inventories fall and pricing reflects a tighter market, Saudi Arabia’s energy minister told Reuters.
Saudi Arabia spearheaded a deal on Friday with Russia and the other so-called OPEC+ oil producers to deepen output cuts through the first quarter of 2020.
In his first interview with Reuters since he became energy minister in September, Prince Abdulaziz bin Salman said he expected OPEC+ producers to continue cooperating beyond March.
“The jury is still out where will we be in March,” he said regarding the level of supply the market will need then.
OPEC+ producers pump more than 40% of the world’s oil and have constrained output since 2017 in an effort to balance rapidly rising output from the United States.
While all oil producers would like to increase output, Saudi Arabia would only do so when it saw global inventories fall closer to the five-year average of 2010-2014, he said.
“The more we are inside this contour, the better…,” he said, adding another indicator would be prompt oil prices moving higher than longer dated ones, known as backwardation, which reflects a tighter market.
He said the steeper the structure was for later months, the better as it would indicate OPEC+ was doing a good job in destocking.
The OPEC+ cuts agreed on Friday run until March, while some watchers had expected them to last until June or even December 2020. Russia opposed a longer deal which some analysts interpret as a sign it may want to leave the pact soon.
Prince Abdulaziz said that was not the case and cooperation with Russia would continue. He said OPEC+ simply wanted to be more flexible in adjusting output and reacting to market needs.
“We as producers all wish for a good room to increase production… With Russia we (Saudi Arabia) are committed to a huge joint cooperation program (besides oil),” he said.
The minister also stressed the need for producers such as Iraq and Nigeria to improve their compliance with promised cuts, Reuters adds.
Even if their compliance did not improve, however, he said Riyadh would not raise output unilaterally but instead would wait for consultations with OPEC+ at its next meeting in early March.