Saudi Arabia warned Opec and allies outside the oil cartel against unleashing more barrels on to a fragile market, adding that the new coronavirus variant was “worrying and unpredictable”.
Prince Abdulaziz bin Salman, the kingdom’s oil minister, told officials from the 23-member Opec+ group, which includes Russia, that joint efforts to restrict production and manage the oil market must be maintained.
“Do not put at risk all that we have achieved for the sake of an instant, but illusory, benefit,” he said ahead of a virtual meeting of ministers on Monday. “Our job is not yet done.”
Opec’s de facto leader Saudi Arabia and other producers in the cartel are at loggerheads with Russia, which has been part of an oil alliance with the group since 2016. Moscow has been keen to increase production in an effort to protect its market share.
Alexander Novak, Russia’s deputy prime minister, told the conference he hoped the rollout of vaccination programmes, that were only going to “accelerate”, would pave the way for a recovery in oil production.
The UAE too, traditionally a Gulf ally of Saudi Arabia’s, has also pushed to raise output in recent months as it increases its domestic production capacity.
Oil prices retreated from earlier highs as the ministerial meeting got under way. Brent crude eased to as low as $50.75 a barrel, a pullback from the nine-month high of $53.33 struck earlier in the day. West Texas Intermediate, the US marker, dipped as low as $48.05.
Oil ministers from the Opec+ group face a complex outlook for crude demand, with the reopening of economies in some parts of the world but renewed lockdowns in others.
The global rollout of vaccines has driven positive sentiment and pushed prices back above $50 a barrel, but case numbers in countries such as the UK have accelerated sharply, prompting new government curbs.
“Infection rates are still high in western industrialised countries, meaning that lockdowns will have to be extended in many places,” said Barbara Lambrecht, an analyst at Commerzbank. “The buoyant start to the year on the oil market risks faltering.”
Last month Opec+ decided to raise production by 500,000 barrels a day from January.
The increase was less than the 2m b/d rise initially agreed as part of a gradual easing of the cuts deal that lopped 9.7m b/d off the market at the height of the pandemic last year.
Although Opec delegates have noted reasons to be hopeful, many have been wary. The group’s research arm has also further downgraded its expectations for oil demand this year.
Prince Abdulaziz added: “As we see light at the end of the tunnel, we must — at all costs — avoid the temptation to slacken off our resolve.”
Adding to tensions within the group, Iran on Monday seized a South Korea-flagged oil tanker that had loaded in Saudi Arabia as it sailed through the Strait of Hormuz, with Iranian state media accusing the vessel of polluting the Gulf.
Iran has repeatedly threatened to target oil flows through the strait in retaliation for foreign aggression against it.