Saudi Arabia won’t restrain its oil production unless other producers, including Iran, agree to freeze output at a meeting this weekend in Doha, the kingdom’s deputy crown prince said. Iran said it had decided to stay at home.
The world’s biggest crude exporter would cap its market share at about 10.3mn bpd to 10.4mn bpd, if producers agree to the freeze, Prince Mohammed bin Salman said during an interview on Thursday at King Salman’s private farm in Diriyah. Yesterday, Iran’s deputy oil minister said the country “saw no reason” to attend the talks because it needs to get back to the level it produced before international sanctions against Tehran.
The comments from the world’s largest oil exporter and Iran will cast doubt on the outcome of today’s summit where at least 15 oil ministers from Opec and beyond will discuss freezing output to stabilise an oversupplied market. Crude oil has rallied more than 30% since an agreement was first mooted in February.
“If all major producers don’t freeze production, we will not freeze production,” said Prince Mohammed, 30, who has emerged as Saudi Arabia’s leading economic force. “If we don’t freeze, then we will sell at any opportunity we get.”
A Russian official said it was possible to reach a deal in Doha to freeze oil output, regardless of Iran whose crude shipments have risen by more than 600,000 bpd this month. That increase has added to the pressure on producer nations to reach an agreement to prop up prices as economies from Venezuela to Nigeria reel from the market rout.
The meeting in Doha is only relevant if no deal is reached, prompting a sharp sell-off in the markets, according to Ed Morse, head of commodities research at Citigroup Inc.
Ministers from Nigeria, Ecuador, Algeria as well as Opec’s secretary-general and Iraq’s representative had all arrived in Doha yesterday. None wanted to comment on prospects for today’s meeting.
The credit ratings of more than 10 oil-producing nations in the developing world were placed on review in March for a downgrade by Moody’s Investors Service, which cited the shock of depressed prices on these economies. The list includes Russia, Kazakhstan, Nigeria, Angola, Gabon and five of the six Gulf Cooperation Council nations - Kuwait, Saudi Arabia, the UAE, Bahrain, and Qatar, according to Moody’s.
Saudi Arabia’s creditworthiness was downgraded at Fitch Ratings after the plunge in oil prices. The kingdom’s rating was lowered one level to AA-, the fourth-highest investment grade, the ratings company said on Tuesday. It maintained a negative outlook for the credit, signalling the possibility of more downgrades.
“If prices went up to $60 or $70, that would be a strong factor to push forward the wheel of development,” Prince Mohammed said. “But this battle is not my battle. It’s the battle of others who are suffering from low oil prices.”
Prince Mohammed also said that Saudi Arabia isn’t concerned because “we have our own programmes that don’t need high oil prices.”
The prince also outlined the amount of spare capacity that the kingdom could bring to the market, underlining its pivotal role in global oil markets.
Saudi Arabia could increase output to 11.5mn bpd immediately and go to 12.5mn in six to nine months “if we wanted to,” Prince Mohammed bin Salman, who is also chairman of the Supreme Council of Saudi Arabian Oil Co, said in an interview on Thursday. The country pumped 10.2mn bpd last month, according to data compiled by Bloomberg.
Brent crude settled at $43.10 a barrel on Friday in London, having rebounded by more than 50% from a 12-year low in January.
After the Organization of Petroleum Exporting Countries abandoned its efforts to boost oil prices in November 2014, focusing instead on protecting its market share, Saudi Arabia increased production to an all-time high of more than 10.5mn bpd, saying that customers were asking for more crude.
The meeting of oil producers in Doha today follows a gathering in February between Saudi Arabia, Qatar, Russia and Venezuela in which the quartet tentatively agreed to cap their production at January’s level.
“There is hope” that producers will reach an agreement in Doha, Dmitry Peskov, the Kremlin’s press secretary, said following the latest conversation between Russian Energy Minister Alexander Novak and his Saudi counterpart. Novak spoke to Saudi Oil Minister Ali al-Naimi by phone on Tuesday to discuss prospects for a production freeze, a person with direct knowledge of the matter said. When Opec reaches a collective consensus, “I will support them,” Prince Mohammed said.