As Nigeria and Angola struggle to meet the target set for it by the Organisation of Petroleum Exporting Countries (OPEC), Saudi Arabia’s larger-than-expected rise in oil prices is a signal it will resist United States (U.S.) pressure to pump more crude, global biggest oil trader, Vitol Group said yesterday.
“They are unlikely to change their stance,” the head of Asia for Vitol, Mike Muller, told Bloomberg yesterday.
Even if OPEC+ did want to raise production faster, it would be hindered by the lack of spare capacity among most members, Muller said. Some, including Angola and Nigeria, are already struggling to meet the group’s targets.
“The peak of their production would seem to be in the past,” Muller said of the two countries.
On Friday, a day after OPEC allies, the OPEC+, stuck to its plan to boost output only at a gradual pace, Saudi Aramco hiked December prices for customers in Asia, the U.S. and Europe. The state producer’s month-on-month increase in the official selling price, or OSP, for its main Asian grade was the third-largest this century, according to data compiled by Bloomberg.
U.S. President Joe Biden put pressure on OPEC+ to speed up the easing of supply curbs that began in early 2020 with the onset of the coronavirus pandemic.
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Oil has climbed around 60 per cent this year to more than $80 a barrel because of the global economic recovery and OPEC+’s cuts. That’s hit American drivers by pushing gasoline up to a seven-year high of $3.70 a gallon.
Saudi Arabia “went further with the OSPs than anyone expected,” Muller said earlier on a webinar hosted by Dubai-based consultancy Gulf Intelligence. “That was a signal to those that were critiquing OPEC+ for not putting enough oil on the market. The Saudis felt they could indeed make higher prices stick.”
“The market does seem to have an expectation that there’ll be some form of SPR release,” Muller said. Still, “the market is in a position where inventories are low and supplies are tight. The Saudis are pricing their oil accordingly.”
‘grappling’ in China always means oil demand reduction,” Muller said.
After the OPEC+ meeting, Saudi Energy Minister Prince Abdulaziz bin Salman said the group had kept oil markets much more balanced than those for natural gas and coal. Prices for both fuels surged to record levels in parts of Asia and Europe in recent months amid a supply squeeze.
Gas futures in Asia and Europe have more than doubled since the end of June, while coal’s up 25 per cent. Brent crude, by contrast, has climbed 10 per cent.
“Oil is not the problem. The problem is the energy complex is going through havoc and hell,” the minister said.