Opec+ will 'tweak' output cuts if necessary, Saudi energy minister says

The alliance has to contend with the return of output from Libya, and possibly Iran and Venezuela under Joe Biden

Prince Abdulaziz also remained optimistic about the rebound in demand in key centres in Asia, particularly in China and India. Chris Whiteoak / The National

Opec+ could recalibrate its current efforts to cut crude production, according to Saudi Arabia’s energy minister.

“We could tweak this agreement subject to what we see in the future," Prince Abdulaziz bin Salman said on Monday.

"It could be a tweak even beyond what the so-called analysts are talking about. We are seeing how things evolve.”

Prince Abdulaziz was speaking to a panel of ministers at the Abu Dhabi International Petroleum Exhibition and Conference, which is being held online this year

The alliance, which is led by Saudi Arabia and Russia, is expected to further ease production cuts unveiled this year to counter a slump in demand due to Covid-19.

Opec and other non-member oil producers have reduced output to balance the market since 2016 and plan to keep tapered cuts in place until 2022.

A historic reduction of 9.7 million barrels per day that was enforced between May and July was pared back to 7.7 million bpd in August.

The group’s plans to further reduce cuts may be delayed as production from Libya exceeds a million bpd.

The North African producer was exempted from the curbs after a force majeure in January halted output.

The chairman of the National Oil Corporation, Mustafa Sanalla, told Dow Jones that Libya was unlikely to cut production until it reached an output level of 1.7 million bpd.

The possible return of exports from Iran and Venezuela will also complicate efforts to ease the curbs. There are expectations that sanctions against both countries will be softened under the Biden administration.

Mr Biden pledged $2 trillion over the next four years to help with energy transition in the US, notably in growing the role of clean resources in the transport, utility and construction sectors.

Prince Abdulaziz, who congratulated US president-elect Joe Biden and vice president-elect Kamala Harris, said that any pivot by the world’s largest oil producer to a greener future was largely aligned with the kingdom’s own policy.

“We are going through the same transformative mode. We are converting our power sector more towards renewable and gas,” he told the panel.

“And there [are] a lot of commonalities in what the new administration will be doing and what we are actually physically doing in Saudi Arabia.”

UAE Minister of Energy and Infrastructure Suhail Al Mazrouei also backed Prince Abdulaziz’s comments about “tweaking” the current volume of cuts, if needed.

“That will have to go to all the countries, and we have to be all convinced that the tweak is required,” he said.

He stressed the UAE’s commitment to drain any excess production through to October and said the energy group was committed to long-term co-operation.

The change in administration in the US could possibly “ease the tension” between the US and China, with respect to the trade war, and is expected to signal growth in demand for oil, he said.

“So, I am a bit more optimistic on that front and I hope that that would happen and that would lead to more prosperity, when it comes to the international trade,” he said.

Mr Biden pledged to reverse the Trump administration’s more controversial moves, particularly Washington's exit from the Paris Agreement.

Mr Al Mazrouei said the impact of the US rejoining the agreement would be significant in the short term.

Russian energy minister Alexander Novak, who was reportedly nominated as deputy prime minister, was represented by his deputy Pavel Sorokin at the panel.

Mr Sorokin declined to comment on the cabinet reshuffle in the Kremlin but noted that it would take about “two to three years” for a demand to return levels of 100 million bpd.