Saudis pledge decisive oil supply increase

VIENNASaudi Arabia promised to act decisively to keep oil prices under control, signalling a real supply boost approaching one million barrels a day (bpd) is on the way to global markets.

“We will do whatever is necessary to keep the market in balance,” Saudi Energy Minister Khalid Al-Falih told reporters on Saturday, while sitting alongside his Russian counterpart Alexander Novak at OPEC headquarters in Vienna. Consumers can rest assured that “their energy supplies are available, are being stewarded by a responsible group of producers”.

After a last-minute compromise that overcame Iranian opposition, last Friday’s OPEC agreement delivered a pledge for a “nominal” supply increase of one million bpd. In reality, several countries are unable to pump more so the real output boost would have been smaller — ranging from Iran’s 500,000bpd estimate up to Iraq’s prediction for as much as 800,000.

Saturday’s agreement dropped the pledge that the one million bpd increase should be shared proportionally among members, opening the way for the full volume to flow, Al-Falih said.

“If we allocated the number prorata basis among the 24 countries, given the capacity of those countries that can increase, it had been estimated that about 60% will be achieved,” Al-Falih said. “But because we went away from allocation on a pro-rata basis, we will be closer to one million than to 600,000bpd.”

The group’s communique still pledged a return to 100% compliance with the original 2016 agreement — ending a period of deeperthan-intended cuts — but Al-Falih insisted that no individual country will be subject to a strict output cap. That means nations including Saudi Arabia can fill the gap left by falling production elsewhere in the OPEC+ alliance.

Al-Falih also said that a committee dominated by Saudi Arabia and Russia will take direct responsibility for overseeing the flow of additional oil, cementing the two nations’ dominance over a group that pumps more than half the world’s crude.

This central role for the two chief proponents of increasing oil supplies to alleviate high prices could provide some assurance to traders, who spurred the biggest rally in US crude futures in six months last Friday after the OPEC published a vaguely worded agreement that fell short of specific output pledges. — Bloomberg