Now it’s your turn: Saudi Arabia urges other oil producers to join output cuts

Saudi Aramco's Ras Tanura oil refinery and oil terminal in Saudi Arabia. (Reuters/FIle photo)
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Updated 14 May 2020

Now it’s your turn: Saudi Arabia urges other oil producers to join output cuts

  • Saudi energy minister Prince Abdulaziz bin Salman and Russian counterpart Alexander Novak discussed oil market developments
  • OPEC and its allies agreed last month to reduce output by 9.7 million bpd for May and June, a record production cut

DUBAI: Saudi Arabia and Russia on Wednesday pledged to rebalance the global oil market and urged other producers to join them in mitigating the effects of the coronavirus pandemic on energy demand.

The two leading oil countries’ energy ministers, Prince Abdul Aziz bin Salman and Alexander Novak, issued a joint statement commending “the efforts of responsible producers around the world who had willingly adjusted their production out of a sense of shared responsibility.”

Novak also welcomed Saudi Arabia’s new voluntary cut of 1 million barrels of oil per day, on top of the big commitments made at the recent OPEC+ meeting, as “clear evidence of the determined actions that are needed to help expedite the rebalancing of the oil market.”

Kuwait and the UAE responded with smaller cuts of their own, but analysts fear other big producers such as Iraq and Nigeria will not be able to follow that lead.

The ministers said: “Our two nations remain firmly committed to achieving the goal of market stability and expediting the rebalancing of the oil market. We are confident that our partners are fully aligned with our goals and they will comply with the OPEC+ agreement.” 

The ministers also said they were encouraged by “recent signs of improvement in economic and market indicators, especially the growth in oil demand and the ease in concerns about storage limits.”

A new report from OPEC on Wednesday said the recent cuts in output “are expected to expedite market rebalancing, and improve the demand for OPEC crude in 2020.”

Nevertheless, the organization said it expected demand for oil to shrink by more than 9 million barrels per day in 2020, 2.23 million more than last month’s estimate. In response, the price of Brent crude, the global benchmark, dipped below the $30 level.

Crude markets were further spooked by a warning from the main US commodities regulator that oil faced the threat of a further plunge when the contract for June delivery of West Texas Intermediate, the US standard, expires next week. “Negative pricing is a possibility,” the regulator said. WTI was trading around $25 per barrel.

Fatih Birol, director of the International Energy Agency, told a forum organized by Dubai consultancy Gulf Intelligence that more cuts by producers might be needed in 2020, but that it was “too early to write the obituary of shale oil.” US production, savaged by the price falls, could start to come back at around $40 per barrel, he said.


European bank ramps up stimulus package

Updated 48 min 8 sec ago

European bank ramps up stimulus package

FRANKFURT: The European Central Bank approved a bigger-than-expected expansion of its stimulus package on Thursday to prop up an economy plunged by the coronavirus pandemic into its worst recession since World War II.

Just months after a first raft of crisis measures, the ECB said it would raise bond purchases by €600 billion ($674 billion) to €1.35 trillion and that purchases would run at least until end-June 2021, six months longer than first planned.

It also said it would reinvest proceeds from maturing bonds in its pandemic emergency purchase scheme at least until the end of 2022.

ECB President Christine Lagarde scotched speculation that the bank could follow the US Federal Reserve in buying sub-investment grade bonds, saying that option was not discussed by policymakers.

The announcement, which comes just weeks after Germany’s Constitutional Court ruled that the ECB had already been exceeding its mandate with a longstanding asset purchase program, prompted a rally in the euro and bond markets.

“Today’s easing measures were another illustration that the ECB means business and stands ready to do whatever is necessary to help the euro area survive the corona crisis in one piece. The ECB will do its part, and it hopes the governments will do their part,” Nordea analysts said in a note.

The bank dramatically revised downward its baseline scenario for euro zone output this year to a contraction of 8.7 percent from the modest 0.8 percent rise it had forecast only in March.

“The euro area economy is experiencing an unprecedented contraction. There has been an abrupt drop in economic activity as a result of the coronavirus pandemic and the measures taken to contain it,” Lagarde said.

She said she was confident that a “good solution” could be found on the legal stand-off with Germany’s top court.