Saudi Arabia will only freeze its oil output if Iran and other major producers do so, the kingdom’s deputy crown prince said, challenging the country’s main regional rival to take an active role in stabilizing the over-supplied global crude market.
Mohammed Bin Salman interviewed on March 30.
Source: Saudi Arabia’s Royal Court
The warning by Mohammed bin Salman, 30, who’s emerged as Saudi Arabia’s leading political force, leaves the outcome of a meeting between OPEC and other big oil producers this month in question and sent prices sharply down. Iran has already said it plans to boost its production after the lifting of sanctions following a deal to curb the country’s nuclear program.
"If all countries agree to freeze production, we’re ready," bin Salman said in an interview with Bloomberg. "If there is anyone that decides to raise their production, then we will not reject any opportunity that knocks on our door.”
In London and New York, oil prices sank more than 4 percent after the comments, with West Texas Intermediate erasing all of its gains for this year. Brent crude fell as much as $1.78 to $38.55 a barrel and WTI dropped $1.62 to $36.72 a barrel.
After the Organization of Petroleum Exporting Countries abandoned its efforts to boost oil prices in November 2014, focusing instead on protecting its market share, Saudi Arabia increased production to an all-time high of more than 10.5 million barrels a day, claiming that customers were asking for more oil.
The meeting of oil producers in Doha on April 17 follows a gathering in February between Saudi Arabia, Qatar, Russia and Venezuela in which the quartet tentatively agreed to cap their production at January’s level. The deal, which helped to lift the price of Brent above $40 a barrel from a 12-year low of $27.10 a barrel in January, was contingent on other countries joining it.
Iranian Oil Minister Bijan Namdar Zanganeh will attend the Doha discussions but won’t join a production freeze, according to a person familiar with the nation’s policy. Tehran will maintain its policy of regaining market share lost during years of sanctions, said the person, who asked not to be identified as the talks are private.
The International Energy Agency said that Iran, in its first full month freed of nuclear sanctions in February, lifted its oil production to a four-year high of 3.22 million barrels a day. Energy Aspects Ltd., a London-based consultant, said Iran boosted oil exports by another 100,000 barrels a day in March.
Traders and analysts have speculated that Riyadh could be ready to voluntarily cap its output at the current level of about 10.2 million barrels a day even if Iran doesn’t join. But asked during the five-hour interview in a royal compound in Riyadh whether Iran needed to take part, bin Salman said, “without a doubt.”
“If all countries including Iran, Russia, Venezuela, OPEC countries and all main producers decide to freeze production, we will be among them," he said.
The latest comments from Riyadh mean the Doha meeting was “looking more and more pointless,” said Abhishek Deshpande, oil analyst at Natixis SA in London. “What is becoming very clear is that Saudi Arabia is serious about moving away from the traditional play of adjusting prices by cutting or freezing supplies by itself."
The prince said that Saudi Arabia was ready to weather the oil crisis by reforming its economy.
"I don’t believe that the decline in oil prices poses a threat to us," he said, adding that a rise in prices, while having budgetary benefits for the kingdom, was also a "threat to the lifespan of oil."
Bin Salman suggested prices will rise over the next two years as demand continues to increase, but he made clear Riyadh has very little appetite for the return of OPEC production management that molded the oil industry for 30 years.
"For us it’s a free market that is governed by supply and demand and this is how we deal with the market," he said.