Saudi Arabia and Russia will work with their OPEC+ partners to respond to oil market events as they arise, Saudi energy minister Prince Abdulaziz bin Salman said June 19 when asked if the two countries would boost output in the event of Iranian supply coming “offline.”
Prince Abdulaziz refused to comment specifically on the Saudi and Russian response in the event of what he called a hypothetical question about Iranian oil supply being hit in the current Israeli-Iranian conflict, stressing the effectiveness of the OPEC+ organization in meeting past challenges.
“I don’t have an answer. We only react to realities. But if anybody gives a question that is not relating to reality today, I fail to see [how] we could predict things and how we relate to it. Plus, we are not two countries running OPEC+,” Prince Abdulaziz said at the St. Petersburg International Economic Forum.
“OPEC+ is 22 countries and we have a [core] group of eight, and it’s incumbent on all of us that we reach out to our friends and make sure that they participate in attending to whatever situation that may prevail then.”
“To respond to a hypothetical question by giving you a hypothetical answer, which none of us two here have the right to speak on behalf of everybody without knowing their opinion, is too much of an ask.”
OPEC+, and OPEC before it, has “been a reliable organization, a serious organization, and attentive to circumstances when they prevail … bringing stability to the market,” Prince Abdulaziz said, describing OPEC+ as “the central bank and the regulator of oil markets.”
OPEC+ kingpins
Saudi Arabia and Russia are the two largest producers in OPEC+, pumping 9.14 million b/d and 8.98 million b/d respectively in May, according to the Platts OPEC+ Survey from S&P Global Commodity Insights.
The kingdom accounts for the majority of the alliance’s spare crude capacity, at over 3 million b/d.
Iran is a fellow OPEC+ member, pumping 2.24 million b/d of crude in May, according to the latest Platts Survey, but it is not subject to a quota due to years of US sanctions, and has seen its influence within the group subside, analysts say.
Nevertheless, Iran’s medium and heavy sour crudes, which are sold to Chinese refiners, would need to be replaced in the event of an export crash.
The latest conflict between Israel and Iran, which began June 13, has targeted primarily domestic oil and gas infrastructure — as well as nuclear and military targets — including the South Pars gas field and storage facilities near Tehran. Meanwhile, Iran has taken Israel’s Haifa refinery offline.
Iran ships 90% of its crude exports from the Kharg Island export terminal, and any attacks on that would hit commodity flows. Shippers have also raised the prospect of critical waterways closing, including the Strait of Hormuz, through which some 20 million b/d of crude, condensate and fuel flows.
Platts-assessed Dated Brent has gained almost $7/b since June 12 on the military escalation.
Meanwhile, the US is reportedly considering joining Israel in its offensive against Iran, which could prompt a further regional escalation.
OPEC+ has been signaling recently that it would boost output, with eight voluntary cutters, among them Russia and Saudi Arabia, promising to hike production by 411,000 b/d in May, June and July, although they did not follow through fully in May.
OPEC is far more bullish than rival forecasters, especially the Paris-based International Energy Agency. Haitham al-Ghais, the OPEC secretary general, reiterated at the St. Petersburg event June 19 that “we don’t see a peak in oil demand, even by 2050.”
Source: Reuters