Page 9 - NorthAmOil Week 10 2021

NorthAmOil COMMENTARY NorthAmOil

conservatism and the leadership that Saudi has with a history of lagging behind,” he added.
shown to right the ship. The hope in Riyadh will be that if it continues
Speaking to Anadolu Agency last week, Ian showing restraint, it can encourage or enforce
Simm, principal advisor at IGM Energy, said: it among others, with many in the industry
“By continuing to restrain its own domestic wary of Saudi Arabia’s expanded spare capacity,
output by 1mn bpd, convincing other mem- which assuming full compliance with its 1mn
ber countries to maintain the production cuts bpd cut, would be around 3mn bpd.
largely as they are, and encouraging improved Indeed, Prince Abdulaziz said that Saudi’s
compliance, Saudi Arabia’s leadership of the voluntary cut would be phased out “at our con-
group and the global oil industry is as evident venience”, adding that the Kingdom was “not in
as ever.” a hurry” to ramp up output levels.
While other members of the cartel appeared While Saudi Arabia failed to fully achieve its
desperate to benefit from higher prices, Riyadh’s promised reduction, it accounted for the major-
interests are best served by growing demand ity of an OPEC+-wide 870,000 bpd cut during
and long-term price stability anywhere north of February compared to March, according to a
$50. As such, the Kingdom continues to portray Reuters survey of OPEC sources.
itself as the guardian of the oil market and hav- At present, OPEC+ output is seen sitting at
ing now more than made up for the damage it 43.6mn bpd throughout the second half of
caused by engaging in a price war with Russia the year, factoring in the Russian and Kazakh Riyadh’s
last year, this self-determined title is justified. upticks. However, several countries have shown
signs of creaking over the past few months. interests are
Where to next? With Iraq’s economic struggles showing little best served by
Attention now moves to the next OPEC+ meet- signs of abating, Baghdad has come under criti-
ing at the end of March. While fundamentals cism from other members for its failure to com- growing demand
over the next few weeks will determine the ply with restrictions. While Oil Minister Jabbar
direction of decision-making, the current state has repeatedly said that the country would com- and long-term
of the market suggests that a large-scale lifting of ply with its quota while making compensatory
production is highly unlikely. cuts to make up for historical non-compliance, price stability
Speaking to Middle East Oil & Gas (MEOG) achieving this has so far been elusive. anywhere north
this week, Simm said that with Saudi seeing the Meanwhile, as the UAE’s Abu Dhabi National
success of the policy on cuts, Riyadh is likely to Oil Co. (ADNOC) seeks to expand its oil pro- of $50.
continue lobbying other members to maintain duction and exert greater influence, reports
their restraint. have surfaced about plans to end the UAE’s
“Non-compliance by other members has OPEC membership. Given the way in which the
been the Kingdom’s main bone of conten- market has been propped up by the actions of
tion over the last year or so. Having prom- OPEC+, any such move is unlikely in the short
ised to do a disproportionate amount of the term, however, as Abu Dhabi and Riyadh to toe-
heavy lifting through its 1mn bpd cut, Prince to-toe in the oil and now the nascent hydrogen
Abdulaziz et al are in a strong position to markets, the former’s ambitions could become
demand better compliance from members problematic for the cartel.™

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