Saudi energy minister on why OPEC+ is not increasing output now

Saudi Energy Minister Prince Abdulaziz bin Salman said on Friday the OPEC+ decision to push back the start of oil output rises by three months until April was based mainly on fundamentals.

“There are so many things going on over the next two months but primarily the decision to delay bringing these barrels to the second quarter is tied to the issue that the first quarter is not a good quarter to bring in volumes as it is known to be a quarter for building stocks,” Prince Abdulaziz told CNBC in an interview, when asked how the incoming administration of US President-elect Donald Trump would impact OPEC’s strategy.

OPEC+, which groups the de facto Saudi-led Organization of the Petroleum Exporting Countries (OPEC), on Thursday also extended the full unwinding of cuts by a year until the end of 2026 due to weak demand and booming production outside the group.

The decision “also gives you a meaningful way to have a better understanding not necessarily of what will happen with regard to the US, respectfully, but there are so many other things – growth in China, growth in Europe, and lack of it thanks to transitioning, and what is happening in the US economy, interest rates, inflation.”

“There are too many moving parts. But honestly the primary cause for moving or shifting – bringing these barrels – is based on fundamentals,” Prince Abdulaziz said.

OPEC+, which pumps about half the world’s oil, had been planning to start unwinding cuts from October 2024 but a slowdown in global demand and rising output elsewhere forced it to postpone the plans on several occasions.

“I think the reality check that we had to attend to was that we have the double task of attending to the fundamentals yet put together something that mitigates these negative sentiments, within of course the controls of what OPEC+ can do,” Prince Abdulaziz said.

“We honestly believe the market next year will be better than what is being projected.”

OPEC+ members are holding back 5.86 million barrels per day of output, or about 5.7 per cent of global demand, in a series of steps agreed since 2022 to support the market. The steps include cuts of 2 million bpd by the whole group, 1.65 million bpd of first stage of voluntary cuts by eight members and another 2.2 million of second stage of voluntary cuts by the same eight members.

On Thursday, OPEC+ agreed to extend the 2 million bpd and the 1.65 million bpd of cuts until the end of 2026 from the end of 2025, according to statements issued by the group. The gradual unwinding of 2.2 million of cuts will start from April 2025 with monthly increases of 138,000 bpd, according to Reuters calculations, and lasting 18 months until September 2026.

“What is not helpful was the accumulation of the lack of compensation,” Prince Abdulaziz said, referring to member countries’ plans to trim output over time for prior production above quotas agreed with OPEC+.

Iraq, Russia and Kazakhstan have presented OPEC with compensation plans.

They were extended to a year and a half from one year “because, again, we took serious commitments at the highest level,” Prince Abdulaziz said. “These things will be delivered if we can extend the period of compensation.”