Friday, 20 September, 2019

OPEC+ alliance to stay for long term, says new Saudi energy minister

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Ginger Lawrence | 13 September, 2019, 06:40

New Saudi oil minister Prince Abdulaziz bin Salman said he intends to maintain production curbs as part of an agreement with the Organization of the Petroleum Exporting Countries, a statement that sent oil futures to their highest close since late July in NY trading.

Saudi Arabia's King Salman over the weekend dismissed Khalid Al-Falih as the energy minister of the Opec (Organization of the Petroleum Exporting Countries) and replaced him with one of his sons.

Saudi Arabia's new energy minister Prince Abdulaziz bin Salman has assured India that his country will remain a reliable supplier to the world's third-largest energy consumer and is committed to investing in the country. In 1985, while in his 20s, he became an adviser to the Saudi energy ministry before being named deputy oil minister and assistant oil minister.

The JMMC of the OPEC and non-OPEC countries a part of the deal meets in Abu Dhabi later this week to take inventory of the oil market, and it might focus on additional cuts.

The market was further pressured by the U.S. Energy Information Administration's (EIA) lowering of its spot crude oil price forecasts, said Bob Yawger, director of energy futures at Mizuho. While this news is creating a bullish tone on the supply side of the equation, an easing of trade tensions between the United States and China is helping to dampen worries about demand growth.

However, he appeared to swing his support behind further curbs to rebalance the crude market.

He added that the so-called OPEC+ alliance, made up of OPEC and non-OPEC countries including Russian Federation, would be in place for the long term.

A Saudi official said on Sunday that there would be no shift in Saudi and OPEC policy on the cuts and that Prince Abdulaziz would work to strengthen OPEC and non-OPEC cooperation.

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Speaking at an global energy forum in Abu Dhabi where he was the star of the show just a day after being appointed by his father King Salman, the new minister deflected concerns over the health of the energy sector.

"Prince Abdulaziz is very experienced and has served in the energy industry for decades", Giovanni Staunovo, an analyst at UBS Group AG in Zurich, told Bloomberg News.

"When it comes to selling the kingdom's crown jewels, the Aramco IPO, we've seen again and again that there has been some concern from across the spectrum in Saudi Arabia, within the royal family, and sort of across the technocratic class that they have to move forward with this carefully", Hawthorne says.

The Saudi king figuratively let the ax fall on Al-Falih for one reason: he failed to deliver the impossible task of bringing oil prices higher.

But each time the kingdom restrains its own production to lift prices, it encourages a new surge in output from countries outside OPEC, especially US shale firms.

Prices on Monday were also supported by a rise in oil imports in China in August, with shipments to the world's biggest importer up 3% from July and almost 10% higher in the first eight months of 2019 from a year earlier.

"Prince Abdulaziz bin Salman is known as an oil production cutter".

"I think the market is now is driven by negative sentiments emanating from negative views, but I don't believe that demand has been impacted", he told reporters on the sidelines of the conference.