Prince Abdulaziz bin Salman, the Saudi Arabian energy minister, stated on Tuesday that the government will not sell oil to any nation that tries to put a price ceiling on its supplies. He also emphasized that the country has started expanding its capacity to 13.3 million b/d by 2027.
Prince Abdulaziz made his comments in an interview with “Energy Intelligence,” where he emphasized that a variety of factors affect market sentiment and said that this year and next year are expected to see continued growth in the global economy.
Yet, he added, “growth rates remain unpredictable.” He also pointed out that China has just recently begun to recover from prolonged Covid lockdowns.
But, it is still unknown how long recuperation will take.
The Prince noted that inflationary pressures are being created by the economic recovery and that this could lead central banks to step up their efforts to control inflation “The “interplay” of these and other factors hinders clarity, and in such a hazy situation, the “sensible and only course of action is to maintain the agreement we struck last October for the remainder of this year, and that is what we intend to do. It’s important to confirm if the encouraging signs are long-lasting.”
“Some people still believe that the deal will be changed before the year is through. For those who insist that we must demonstrate our adherence to the current agreement by Friday, December 29, 2023, “Energy Minister made a note.
When asked about the Nopec law, Prince Abdulaziz drew a distinction between it and raising the price cap, pointing out that both policies might have an impact on the oil market since they introduce fresh levels of risk and uncertainty “at a time when clarity and stability are most required.”
“I must reaffirm the argument I made in August and September that such policies would inescapably increase market instability and volatility and have a detrimental effect on the oil industry. Opec-plus, in contrast, has made every effort and has been successful in significantly increasing stability and transparency to the oil market, particularly when compared to other other commodity markets.”
The Nopec bill, in the opinion of the Saudi Energy Minister, would undermine investments in oil capacity, lead to a severe shortfall in global supply relative to future demand, and undermine the importance of holding spare capacity and the consequences of not holding spare capacity on market stability.
Producers, consumers, and the oil business will all experience the effects on a global scale.
“The same is true for price restrictions on oil or any other commodity, whether they are placed on a nation or a collection of nations. Individual or group counterreactions will result, with unbearable repercussions in the form of extreme volatility and instability. Thus, if Saudi Arabia’s oil exports were subject to a price cap, we would stop selling to any nation that did so, as well as reducing our oil production. I wouldn’t be shocked if other countries followed suit “Furthermore, he said.
In terms of global spare capacity, Prince Abdulaziz reaffirmed that both spare capacity and global emergency stocks are the ultimate safety net for the oil market in the event of potential shocks, stating that he has repeatedly warned that global demand growth will outpace current global spare capacity, while emergency reserves are at a historic low.
“Thus, it is essential that policies be in place to support investments needed to develop spare capacity in a timely way, and that global emergency stockpiles be maintained at an acceptable and comfortable level.”
According to Prince Abdulaziz, the Kingdom of Saudi Arabia has proactively begun expanding its capacity to 13.3 million b/d by 2027. He emphasized that the expansion is “already underway in the engineering phase and the first increment is projected to come onstream in 2025.”