Prince Abdulaziz bin Salman, Saudi energy minister, said on Tuesday that the government would not sell oil to any country that tried to cap the price of its supplies. He also pointed out that the country has started increasing its capacity to 13.3 million bpd by 2027.
Prince Abdulaziz made the comments in an interview with “Energy Intelligence”, where he pointed out that a variety of factors affect market sentiment and said that this year and next should see continued growth in the Mondial economy.
Yet, he added, “growth rates remain unpredictable.” He also pointed out that China had only just begun to recover from prolonged Covid lockdowns.
But, it is still unclear how long the recovery will take.
The Prince noted that inflationary pressures are being created by the economic recovery and this could lead central banks to step up their efforts to control inflation. the only sensible course of action is to maintain the agreement we reached last October for the rest of the year, and that is what we intend to do. It is important to confirm whether the encouraging signs are sustainable.”
“Some people still believe that the agreement will be amended before the end of the year. For those who insist that we must demonstrate our adherence to the current agreement by Friday, December 29, 2023”, remarked the Minister Energy.
Asked about the Nopec law, Prince Abdulaziz drew a distinction between it and raising the price cap, pointing out that both policies could impact the oil market as they introduce new levels of risk and uncertainty. “at a time when clarity and stability are most needed.”
“I must reaffirm the argument I made in August and September that such policies would inevitably increase market instability and volatility and have a detrimental effect on the oil industry. OPEC-plus, on the other hand , has made every effort and succeeded in significantly increasing the stability and transparency of the oil market, especially compared to other commodity markets.”
The Nopec bill, in the opinion of the Saudi energy minister, would jeopardize investments in oil capacity, lead to a serious shortfall in global supply compared to future demand and undermine the importance of holding a spare capacity and the consequences of not holding spare capacity on market stability.
Producers, consumers and the oil industry will all be impacted globally.
“The same applies to restrictions on the price of oil or any other commodity, whether imposed on a nation or on a group of nations. Individual or collective counter-reactions will result, with unbearable repercussions under the form of extreme volatility and instability, so if Saudi Arabia’s oil exports were subject to a price cap, we would stop selling to any nation that did, as well as cut our production by oil. I wouldn’t be shocked if other countries followed suit,” he said.
In terms of global reserve capacity, Prince Abdulaziz reiterated that reserve capacity and global emergency stocks are the ultimate safety net for the oil market in the event of potential shocks, saying he has repeatedly warned that global demand growth will outpace current global spare capacity. , while emergency reserves are at a historically low level.
“Thus, it is essential that policies are in place to support the investments needed to build up spare capacity in a timely manner, and that global emergency stocks are maintained at an acceptable and comfortable level.”
According to Prince Abdulaziz, the Kingdom of Saudi Arabia has started to proactively expand its capacity to 13.3 million barrels per day by 2027. He stressed that the expansion is “already underway in the development phase. engineering and that the first augmentation should enter service in 2025”. “