In an interview with Energy Intelligence on Tuesday, Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman elaborated on the thinking behind Opec-plus’ latest policy decisions and his outlook on global oil markets. Below is a full transcript.
Q: What message was intended to be conveyed by the recent Opec-plus cut?
A: This decision was an expression of our willingness to use all of the tools in our kit. This simple tweak shows that we are attentive, pre-emptive and proactive in terms of supporting the stability of the market to the benefit of market participants and the industry.
Q: Why was there a cut of 100,000 barrels per day?
A: As the Opec-plus meeting clearly stated, this measure was a reversion to the production level of August. The addition of the 100,000 barrels in September was always intended as a measure for that month only.
Q: Do you think there are signs of a looming global recession?
A: We are seeing mixed signals in relation to economic growth from different parts of the world, and there has been a tendency towards exaggeration in some of the negative analyses of the global economic situation. In this regard, we think the jury is still out, but that only reinforces the need to be ready to use all the tools in our kit. It’s also worth highlighting that historical data indicates that you could have recessions with limited oil demand contractions and in fact you could even have demand growth in recession years as was the case in 1991.
Q: What are the main causes of the current volatile market?
A: As I have said before, there is a self-perpetuating vicious circle in the paper market of extreme volatility and very thin liquidity. This has undermined the market’s essential function of efficient price discovery, with prohibitive costs for users of hedging and risk management techniques in oil and other commodities, creating new types of risk and instability. This cycle is exacerbated by speculative reports and analysis about demand destruction, possible return of large supply volumes, and measures related to price caps, embargoes and sanctions.
Q: Does Opec-plus have any intention of defending a certain price range?
A: Opec-plus, as is well known, does not target prices or prices ranges. Its aim is to support market stability and supply and demand balance for the benefit of market participants and the industry.