OPEC+ oil production cuts can continue past March if needed, Saudi prince says

The OPEC+ oil production cuts can “absolutely” continue past the first quarter if needed, Saudi Energy Minister Prince Abdulaziz bin Salman said, as he pledged the curbs would be delivered in full.

The supply reductions announced last week of more than 2 million barrels a day — about half of which are coming from Saudi Arabia — will only be withdrawn after consideration of market conditions and using a “phased-in approach,” he said.

As the prince was speaking to Bloomberg, crude prices remained below the level seen before the OPEC+ meeting, trading near $78 a barrel in London.

Oil has failed to find renewed momentum after market-watchers noted that only about half of the cuts are entirely new, and also questioned whether all of the promised supply reductions will actually materialize.

Prince Abdulaziz said these skeptics will be proved wrong.

“I honestly believe that the delivery of the 2.2 million will happen,” he said in an interview in Riyadh on Monday. “I honestly believe that 2.2 million will overcome even the usual inventory build that usually happens in the first quarter.” There are already signs that demand is improving, he said.

As traders try to gauge the real impact of the agreement between the Organization of Petroleum Exporting Countries and its allies, one of the biggest questions is about Russia. Its contribution comes from export curbs, not outright production cuts as is the case for other OPEC members.

Prince Abdulaziz said he would have preferred to see a reduction in output, but couldn’t convince his Russian counterpart. Moscow has long argued that freezing weather and other geological conditions make it more difficult to curb production in the first few months of the year.

“We did try,” Prince Abdulaziz said. “We also know it’s extremely tough for Russia to cut production in the winter.”

Even as Riyadh makes the greatest effort to rebalance the oil market, with deeper cuts than any of its allies, Prince Abdulaziz emphasized the level of trust between Riyadh and Moscow, which is the key relationship in OPEC+.

While Russia may not be cutting output, it is carrying out its exports curbs, he said. If Moscow ever falls short of its pledges, as it did earlier this year, it has been transparent and promised to make amends.

“We believe them,” Prince Abdulaziz said. “I honestly believe they are doing everything by the book.”

It’s just as important that Russia has the trust of the market, which requires outside verification, the prince added.

“This is what we’ve been saying to them: What counts is not us believing you, what counts is the market, the secondary sources, the tanker trackers,” the prince said. “You have to approach them, you have to work with them.”

Prince Abdulaziz said he has the same faith in key Gulf ally the United Arab Emirates, which has for several years been arguing that it should be allowed to produce more to monetize its massive investments in capacity.

“We would not have done this deal if we had believed that they are not doing what they are supposed to do,” he said when asked about the UAE’s commitment to the OPEC+ deal.