Page 5 - MEOG Week 10 2021

MEOG COMMENTARY MEOG

Saudi Energy Minister
Prince Abdulaziz bin
Salman Al-Saud.

conservatism and the leadership that Saudi has The hope in Riyadh will be that if it continues
shown to right the ship. showing restraint, it can encourage or enforce it
Speaking to Anadolu Agency last week, Ian among others, with many in the industry wary
Simm, principal advisor at IGM Energy, said: of Saudi Arabia’s expanded spare capacity, which
“By continuing to restrain its own domestic assuming full compliance with its 1mn bpd cut,
output by 1mn bpd, convincing other member would be around 3mn bpd.
countries to maintain the production cuts largely Indeed, Prince Abdulaziz said that Saudi’s
as they are, and encouraging improved compli- voluntary cut would be phased out “at our con-
ance, Saudi Arabia’s leadership of the group and venience”, adding that the Kingdom was “not in
the global oil industry is as evident 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 and ity of an OPEC+-wide 870,000 bpd cut during
long-term price stability anywhere north of $50. February compared to March, according to a
As such, the Kingdom continues to portray itself Reuters survey of OPEC sources.
as the guardian of the oil market and having now At present, OPEC+ output is seen sitting
more than made up for the damage it caused by at 43.6mn bpd throughout the second half of
engaging in a price war with Russia last year, this the year, factoring in the Russian and Kazakh
self-determined title is justified. upticks. However, several countries have shown
signs of creaking over the past few months.
Where to next? With Iraq’s economic struggles showing little
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-
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-
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,
Simm told Middle East Oil & Gas (MEOG) achieving this has so far been elusive.
this week that with Saudi seeing the success of Meanwhile, as the UAE’s Abu Dhabi National
the policy on cuts, Riyadh is likely to continue Oil Co. (ADNOC) seeks to expand its oil pro-
lobbying other members to maintain their duction and exert greater influence, reports have
restraint. surfaced about plans to end the UAE’s OPEC
“Non-compliance by other members has membership.
been the Kingdom’s main bone of contention Given the way in which the market has been
over the last year or so. Having promised to do propped up by the actions of OPEC+, any such
a disproportionate amount of the heavy lifting move is unlikely in the short term, however, as
through its 1mn bpd cut, Prince Abdulaziz et al Abu Dhabi and Riyadh to toe-to-toe in the oil
are in a strong position to demand better com- and now the nascent hydrogen markets, the for-
pliance from members with a history of lagging mer’s ambitions could become problematic for
behind,” he added. the cartel.™

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