By Brai Odion-Esene, SW4 Insights for Mace News
WASHINGTON (MaceNews) – The oil market might have bounced back and stabilized following the tumult of Spring 2020, when the onset of the COVID-19 pandemic put the global economy in a coma and crushed energy demand, but that doesn’t mean major oil producing countries should rush to add more supply, Saudi Arabia and fellow heavyweight Russia warned Thursday.
“There is no doubt that the global oil market has improved since we last met,” Saudi Arabia’s Minister of Energy Abdulaziz Bin Salman said in opening remarks to begin the March meeting of OPEC+ – which includes Mexico and Russia.
He warned, however, that “the uncertainty surrounding the pace of recovery has not receded, and we have learned over the course of the past year the difficulty of making hard predictions in such an unpredictable environment.”
As a result, “I would once again urge caution and vigilance,” the Saudi minister continued, arguing that after successfully mitigating the impacts of the last three waves of the COVID-19 pandemic, complacency would jeopardize the gains made so far.
Beginning in January 2021, OPEC-plus countries collectively adjusted production cuts from 7.7 million barrels per day to 7.2 million bpd. Saudi Arabia then decided to voluntarily cut 1 million bpd from its output in February as well as March. This has “accelerated” the balancing of the oil market, Bin Salman added.
Still, “do not cast caution to the wind, nor endanger our achievements over the past year. We have elected to follow a careful, proactive approach that has proved successful,” Bin Salman argued. “Before we take our next forward steps, let us be certain that the glimmer we see ahead are not the headlights on an oncoming express train.”
“The right course of action now is to keep our powder dry, and to have a contingency and reserve to ensure against any unforeseen actions,” he concluded.
Russia Energy Minister Alexander Novak’s opening statement mirrored Bin Salman’s call for restraint.
While the decline in oil demand caused by the pandemic has been absorbed, “the market has not yet fully recovered,” he said. “A large number of uncertainties and unknowns remain.”
He singled out the ongoing spread of coronavirus variants as a major X-factor going forward, as well as the pace of vaccinations around the world, and how long governments choose to keep lockdown measures in place. OPEC-plus has to keep all these in mind in terms of maintain a stable and predictable oil market.
So, “we (OPEC+) all need to stick to the voluntary obligations … in maintaining full conformity with production levels set by the Declaration of Cooperation,” Novak said.
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Contact this reporter: brai@macenews.com.
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