UNITED STATES, WASHINGTON (OBSERVATORY) — Saudi Arabia’s energy minister on Thursday urged oil countries to “hold together” and abide by a production cut deal in the face of falling prices and expectations that crude growth will remain weak due to trade disputes.
The kingdom has cut production more than it was asked to help make the current agreement reached at the beginning of the year a 1.2 million bpd cut.
But other countries, including Iraq and Nigeria, are accused of exceeding the agreed level.
“Every country has to fulfill its obligations,” he said on the sidelines of a meeting of the ministerial committee charged with following up the implementation of the agreement, stressing “the importance of maintaining cohesion within OPEC and outside producers, led by Russia.”
The minister, who is the first Emir to assume the vital oil ministry, stressed “the main objective of the oil policy of the Kingdom to enhance the stability of world oil markets.”
“The kingdom’s oil production will reach 9,890 million barrels per day” in October, less than 10 million barrels, the rate Saudi Arabia has maintained in recent months, said Prince Abdul Aziz, son of Saudi King Salman.
Crude prices are now floating around $ 60 a barrel after falling to the $ 50 level a few months ago.
Previous production cuts helped boost prices, but the latest deal earlier this year did not produce the desired results, as prices continued to decline despite the approval of an extension of production cuts for an additional nine months starting in June.
Oil-producing countries are considering the option of a new cut. Saudi Arabia, the de facto leader of OPEC, is turning its attention to this option given the potential negative impact of the move on its revenues.
– Low growth –
After the 16th meeting in Abu Dhabi, the committee did not announce a recommendation to further cut production for a major meeting of oil countries in Vienna in December, but stressed in a statement the need for “commitment and transparency.”
It also announced a new meeting in Vienna in December before meeting the oil states.
UAE Energy Minister Suhail Al Mazrouei said on Sunday that oil-producing countries would do “everything necessary” to balance the crude market.
At the same time, he warned that the decision to increase the agreed daily output cuts may not be the optimal step to raise prices because of the possible fallout from the US-China trade war.
The trade war between the United States and China plays a key role. The threat of taxation has created a fear of a global economic downturn that could undermine oil demand.
To coincide with the Abu Dhabi meeting on Thursday, the International Energy Agency said it expected global oil demand growth to remain weak due to a weak economy and the impact of trade disputes.
“International trade relations have further deteriorated in recent weeks, but US and Chinese negotiators have announced that trade negotiations will resume in early October,” the Paris-based agency said in its monthly report.
“Trade disputes and growing uncertainty about the impact of the UK’s possible exit from the EU are reducing global growth by weakening business and consumer confidence, reassessing the supply chain, reducing investment and cutting trade directly.”
Faced with these uncertainties, the International Energy Agency (IEA) kept estimates of demand growth in 2019 and 2020, which were cut last month, unchanged at 1.1 million barrels per day and 1.3 million barrels, respectively.
Demand growth in the first six months of this year was 0.5 million bpd and fell to 0.2 million bpd in June, it said.
“ For the second half of 2019, we do not expect further deterioration in economic conditions and trade disputes,” she said.
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