Saudi Arabia’s energy minister said global energy producers have the ability to tweak an agreement on production cuts that could be extended through the end of 2022, signaling the anticipation of continued weakened demand for oil as the coronavirus pandemic peaks again in Europe and the United States.
“OPEC has been and continues to be taking a proactive role,” said Prince Abdulaziz bin Salman during the Abu Dhabi-sponsored ADIPEC energy conference, which is taking place virtually this year.
“We’re keeping our flexibility in our hands,” Prince Abdulaziz said, without committing specifically to how far into the future cuts of 7.7 million barrels of oil a day or more could go on for. “I don’t put policy lines ahead of reaching out to everybody,” he said.
The OPEC oil cartel, led by Saudi Arabia, and non-OPEC nations including Russia agreed in April to cut as much as 10 million barrels of crude a day, or a tenth of global supply, until July to keep oil prices from plunging amid lower demand for crude.
The so-called OPEC+ agreement aimed to ease those cuts to 7.7 million barrels per day through the end of the year, and to nearly 6 million a day for 16 months beginning in January.
The UAE’s Energy Minister Suhail al-Mazrouei also echoed confidence in the OPEC+ agreement, saying the deal has been working.
“We have also demonstrated as a group that we’ve been very disciplined,” he said.
The OPEC+ countries are convening again on Nov. 17, but there’s no guarantee they will be able to agree on deeper cuts into 2021 given that some countries are losing revenue amid existing quotas on production.
The virus has dampened the price of oil, affecting key revenue for oil producing nations.
On Monday, Brent crude, the international standard, traded around $40 a barrel. US benchmark crude traded at just over $38 a barrel.
There’s little guarantee of a rebound with major European cities rolling out various lockdown measures due to alarming spikes in new coronavirus cases ahead of the coming winter months and flu season.
Prince Abdulaziz said that while oil-producing nations are hopeful a vaccine can help mitigate the virus and help the world regain a sense of mobility, the current agreement can always be tweaked.
OPEC Secretary General Mohammad Barkindo struck an optimistic tone for the future of oil, saying that while there’s been a contraction of nearly 9.8 million barrels of oil a day in 2020, forecasts for next year are being revised upward north of 6.5 million barrels a day.
“There is no cause for alarm,” he said, adding that countries to the OPEC+ agreement have been complying with the cuts since May.
Similarly, Abu Dhabi National Oil Company CEO Sultan al-Jaber said at the height of the lockdowns of March and April the world still consumed 75 million barrels of oil per day.
Oil demand, he said, only fell to below 90 million barrels a day for 12 weeks. It’s currently around 92 million barrels per day.
“We know the world will still need oil and gas when all of this is done,” he said.