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

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Saudi Oil Minister Prince Abdulaziz bin Salman on May 23 told market speculators to “watch out,” reiterating his warning that they could face pain ahead.

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

“Speculators, like in any market, they are there to stay. I keep advising that they will be ouching. They did ouch in April. I don’t have to show my cards, I’m not [a] poker player … but I would just tell them, watch out,” he said during an energy-focused panel of the Qatar Economic Forum in Doha.

The Saudi oil minister has previously struck out against price speculators looking to profit off predicting the output decisions of OPEC+, which next meets on June 4.

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

OPEC+, a group of 23 oil-producing nations chaired by Saudi Arabia, in October decided to lower output by 2 million barrels per day in an effort to bolster prices, given concerns over global consumption. The move was met with immediate backlash from the U.S. over the strain on fuel-consuming households.

“We were, as OPEC+, blamed in October, blamed in April. Who has the right numbers? Who gauged the situation in a much more, I would say, responsible way, but attentive way?” Abdulaziz said May 23.

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

In the weeks since April’s voluntary cuts were announced, crude prices have been depressed on the back of banking turmoil, recessionary signals, and a slower-than-expected Beijing reopening and subsequent uptick in demand from China, the world’s largest importer of oil.

Market watchers are now questioning whether OPEC+ will in June move toward another production decline to crutch prices, even as Paris-based watchdog the International Energy Agency now sees a deep supply squeeze on the horizon.

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

The organization’s executive director, Fatih Birol, nevertheless on Sunday told CNBC 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 per barrel to $95 per barrel by year-end, given higher-than-expected crude oil volumes and recession fears. They anticipate the market will be undersupplied by nearly 1.5 million barrels per day in June.

“With several OPEC+ member countries voluntarily removing barrels from the market, and amid rising demand during the Northern Hemisphere’s summer, we expect larger inventory draws to materialize and bring investors back to the oil market,” they said.

Saudi Arabia’s oil minister on Tuesday also emphasized the risks of market uncertainty, along with the progressive depletion of spare capacity in producing countries — an argument he has previously deployed to advocate for higher 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 capacities because countries are not investing both in oil and gas,” he said.

“We have a very funny trajectory of where demand will be. So if you are a hedger, as we are, we’ll have to take action to preempt any possibility of further volatility … but we are forthrightly accepting the challenge, and we will continue attending to the challenge.”