Saudi oil minister warns market speculators to ‘watch out’ ahead of OPEC+ meeting

Abdulaziz bin Salman, Saudi Arabia’s Minister of Energy, speaks during a panel session at the Qatar Economic Forum in Doha, Qatar on May 23, 2023.

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Saudi Oil Minister Prince Abdulaziz bin Salman on Tuesday told market speculators to “watch out”, repeating his warning that they could face pain ahead.

“Speculators, like in any market, they’re here to stay. I keep letting them know they’re going to flop. They au in April. I don’t have to show my cards, I’m not [a] poker player (…), but I just wanted to tell them, be careful,” he said during an energy-focused panel of the Qatar Economic Forum in Doha.

The Saudi oil minister has previously hit out at oil price speculators who want to profit from predicting production decisions by OPEC+, which meets on June 4.

Most recently, several members of the OPEC+ alliance voluntarily – and independently of the group’s broader strategy – announced that they would cut their crude oil production by a combined 1.6 million barrels per day. The move briefly boosted prices, which have since given up gains. Ice Brent futures for July expiry were up 50 cents a barrel from their May 22 settlement to $76.49 a barrel by 12:05 London time.

OPEC+, a group of 23 oil-producing nations led by Saudi Arabia, decided in October to cut production by 2 million barrels per day in a bid to bolster prices, given concerns over global consumption. The move was met with immediate backlash from the US over the burden on fuel-consuming households.

“We were, as OPEC+, blamed in October, blamed in April. Who has the right numbers? Who measured the situation in a much more, I would say, responsible way, but mindful?” Abdulaziz said on Tuesday.

“I think in the last six to seven months we have proven to be a responsible regulatory institution,” he added, noting that the market is experiencing ongoing volatility and requires OPEC+ to remain proactive and preemptive.

In the weeks since April’s voluntary cuts were announced, crude oil prices have been pressured by banking turmoil, signs of a recession and a slower-than-expected reopening in Beijing and subsequent pick-up in demand from China, the world’s biggest crude importer.

Market watchers are now questioning whether OPEC+ in June will move towards another output cut to crutch prices, even as the Paris-based watchdog IEA now sees a deep supply squeeze on the horizon.

“The current market pessimism … stands in stark contrast to the tighter market balances we expect in the second half of the year, when demand is expected to eclipse supply by nearly 2 mb/d,” the IEA said in its latest oil market. Report from May.

Still, the organization’s CEO Fatih Birol told CNBC on Sunday that a potential — if unlikely — U.S. debt default could trigger a drop in oil demand and prices.

In a May 17 note, analysts at Swiss bank UBS trimmed their Brent price forecasts by $10 a barrel to $95 a barrel by the end of the year, given higher-than-expected crude volumes and fears of a recession. They expect the market to be undersupplied by almost 1.5 million barrels per day in June.

“With more OPEC+ member countries voluntarily removing barrels from the market, and amid increasing demand during the Northern Hemisphere summer, we expect greater inventory draws to materialize and bring investors back into the oil market,” they said.

Saudi Arabia’s oil minister on Tuesday also emphasized the risk of market uncertainty, along with the gradual depletion of spare capacity in producing countries – an argument he has previously used to advocate increased investment in fossil fuels, in addition to spending on renewable projects.

“Look at where we are now: energy security is being shackled, running out of capacity because countries are not investing in both oil and gas,” he said.

“We have a very funny trajectory of where demand will be. So if you’re a hedging player, as we are, we have to take action to prevent any possibility of further volatility (…) but we simply accept the challenge, and we will continue to rise to the challenge.”