Saudi Arabia’s Energy Minister said OPEC+ has the means and flexibility to deal with challenges, including by cutting oil output, state news agency SPA reported on Monday, citing comments Prince Abdulaziz bin Salman made to Bloomberg.
The minister also said that paper and physical markets had become increasingly disconnected, and that a new deal between OPEC+ partners beyond 2022 would be agreed.
“Soon we will start working on a new agreement beyond 2022,” he said.
Brent crude prices pared losses sharply on the news and were trading down 55 cents at $96.17 by 1637 GMT, having earlier slipped to as low as $92.36.
The Organization of the Petroleum Exporting Countries and allies led by Russia, a group known as OPEC+, agreed to increase output by 648,000 bpd in each of July and August as they fully unwind nearly 10 million bpd of cuts implemented in May 2020 to counter the COVID-19 pandemic.
The group agreed earlier this month to raise production quotas by another 100,000 bpd in September as it faced pressure from major consumers including the United States, which are keen to cool prices.
Only Saudi Arabia and the United Arab Emirates are believed to have spare capacity and the ability to increase production in a meaningful way.
But Prince Abdulaziz pointed to thin liquidity and extreme volatility taking focus away from the issue of spare capacity.
“Without sufficient liquidity, markets can’t reflect the realities of the physical fundamentals in a meaningful way and can give a false sense of security at times when spare capacity is severely limited and the risk of severe disruptions remains high,” he said.