DUBAI: Saudi Arabia has called on its partners in the OPEC+ alliance to be vigilant, disciplined and transparent in their commitment to the oil cuts agreement that have brought global crude back from the chaos of earlier this year.
In hard-hitting opening remarks, Prince Abdul Aziz bin Salman, the Kingdom’s energy minister, said it was essential for all members of the 23-strong organization to comply fully with the terms of their agreements.
“Full compliance is not an act of charity. It is an integral part of our collective effort to maximize the interest and gains of every individual member of this group. And compliance is a sovereign decision that we have all taken willingly and responsibly,” he told delegates at the monthly virtual meeting of the Joint Ministerial Monitoring Committee (JMMC) that oversees OPEC+ affairs.
The meeting had heard a technical report showing that only six of the OPEC+ members had stuck by agreed production levels in the period from May to August.
Saudi Arabia cut by far the biggest amount in that period, while the UAE - traditionally a diligent conformer to OPEC+ agreements - missed its production targets by a significant amount, which has widened over the past two months.
But the overall level of compliance to the cuts was at a historical high level in August, with 101 per cent conformity among all OPEC+ members.
The Prince said a “key lesson of the past few weeks is that being transparent with the market, and with this group, about production and compliance always pays off.
“Attempts to outsmart the market will not succeed, and are counter-productive, when we have the eyes, and the technology, of the world upon us,” he added.
This section contains relevant reference points, placed in (Opinion field)
In a meeting with journalists, Suhail Al-Mazrouei, the UAE energy minister who was seated alongside the Saudi Prince in Riyadh, reaffirmed his full support for the OPEC+ commitments. “We have always been a transparent and full partner to all out colleagues in these agreements,” he said.
Prince Abdul Aziz said he wanted to “dispel any concerns that may have been assumed by analysts, the media or the market” about the UAE’s commitment to the OPEC+ cuts.
Under-complying countries, including the UAE, have agreed to cut more crude in the future to compensate for past shortfalls, but Prince Abdul Aziz warned: “The compensation mechanism was not established as a substitute for full compliance, nor to encourage non-compliance. Not fully complying, and then compensating, should not become the norm.”
He added he would like to see the compensation scheme ended this year, and the JMMC was considering that possibility.
Some analysts had expected the OPEC+ meeting to agree to reverse some of the increases brought in under phase two of the historic April cuts deal, but this was never under serious consideration.
“In the face of uncertainty, the market will be increasingly looking to us for direction. We must demonstrate that we are disciplined and fully committed to our agreement, and as a group we are pro-active and pre-emptive, and ready to act when it is needed,” Prince Abdul Aziz said.
“There is no other choice or panacea. This is the only effective medicament to see us through these challenging times,” he added.
Prince Adbul Aziz had a blunt message for speculators looking to make profits in volatile trading. “To those who want to short the market, I say - make my day.”
The strong Saudi message to OPEC+ was echoed by the Russian energy minister, Alexander Novak, who said: “I urge everyone to continue sticking to this and to maintain the high level we have achieved.”
Global oil prices, which have been under pressure in recent weeks on fears of a COVID-19 resurgence and falling oil demand, recovered some lost ground to trade over $43 a barrel.