Saudi vows decisive oil supply boost to comfort consumers

Bloomberg

Saudi Arabia promised to act decisively to keep oil prices under control, signalling a real supply boost approaching 1 million barrels a day is on the way to global markets.
“We will do whatever is necessary to keep the market in balance,” Saudi Energy Minister Khalid Al-Falih told reporters, while sitting alongside
his Russian counterpart Alexander Novak at OPEC headquarters in Vienna. Consumers can rest assured that “their energy supplies are available, are being stewarded by a
responsible group of producers.”
Al-Falih gave a detailed explanation of how the so-called OPEC+ deal will work. It would be troubling if that jump in prices became a trend, the minister said, adding that producers with spare capacity, such as Saudi Arabia, can fill any gap left by falling production elsewhere.
The deal between OPEC members pledged a “nominal” supply increase of 1 million barrels a day.
In reality, ministers said several countries are unable to pump more so the real output boost would have been smaller — ranging from Iran’s 500,000 barrel-a-day estimate up to Iraq’s prediction for as much as 800,000.
The accord, in which non-OPEC countries ratified the previous day’s deal, dropped the pledge that the 1 million barrel-a-day increase should be shared proportionally among members, opening the way for the full volume to flow, Al-Falih said.
“If we allocated the number pro-rata basis among the 24 countries, given the capacity of those countries that can increase, it had been estimated that about 60 percent will be achieved,” Al-Falih said.
“But because we went away from allocation on a pro-rata basis, we will be closer to 1 million than to 600,000 barrels a day.”
The group’s communique still pledged a return to 100 percent compliance with the original 2016 agreement — ending a period of deeper-than-intended cuts — but Al-Falih insisted that no individual country will be subject to a strict output cap. Novak was fully aligned with Al-Falih, saying Russia would contribute as much as 200,000 barrels a day to the supply boost.
“The real increase of production would be a figure exactly close to 1 million,” Novak said in an interview with Bloomberg television. “The decision is very straightforward.”
Al-Falih also said the OPEC+ Joint Ministerial Monitoring Committee, which has overseen the group’s supply cuts, will play a key role in managing how production is increased. Both Russia and Saudi Arabia are members, and the committee’s increasing importance will help cement their dominance over a coalition that pumps more than half the world’s crude.
State oil company Saudi Aramco had anticipated this week’s decision and was already ramping up output, Al-Falih said. He promised a month-on-month hike in the order of “hundreds of thousands of barrels” rather than “tens of thousands.” He later floated a range of 250,000 to 400,000 barrels a day.