Page 5 - FSUOGM Week 10 2021

FSUOGM COMMENTARY FSUOGM

OPEC+ representatives
meet in March 2020.

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

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