Saudi Energy Minister Prince Abdulaziz bin Salman has warned fellow OPEC+ ministers that if other producers continue to flout their output quotas in the agreement, oil prices could slump to $50 per barrel, The Wall Street Journal reported on Wednesday, citing OPEC delegates who attended a conference call last week.
The warning from the most influential minister of the OPEC+ alliance was interpreted by other producers as a veiled threat that Saudi Arabia is fed up with quota cheaters and could go for a price war to defend its market share, the Journal’s sources said.
The message from the Saudi minister was that “there is no point in adding more barrels if there isn’t room for them in the market,” a delegate who attended last week’s call told the Journal.
“Some better shut up and respect their commitments toward OPEC+,” was the message from OPEC’s top producer and leader, Saudi Arabia, according to the source.
The Kingdom has been going above and beyond to restrict supply to the market for more than a year. Apart from its share of the OPEC+ cuts in force since last summer, Saudi Arabia is also voluntarily keeping another 1 million barrels per day (bpd) off the market. It has been strictly sticking to its plan to produce “around 9 million bpd”—it has been consistently in line with its targeted oil output over the past year.
Iraq and Kazakhstan, on the other hand, have been major overproducers and have not kept their end of the deal.
During last week’s call, Prince Abdulaziz bin Salman reportedly singled out these two producers – OPEC’s second-largest producer Iraq, and non-OPEC producer Kazakhstan.
Non-OPEC Russia has also been a laggard in compliance with the OPEC+ deal.
The Financial Times reported last week that Saudi Arabia is willing to endure short-term oil price and revenue pain as it is making a U-turn in policy and going to take back market share and ditching its unofficial $100 oil price target.
Persistent overproduction from some OPEC+ producers has kept a lid on oil prices as the market perceives there is more than enough OPEC+ and non-OPEC+ supply to meet underwhelming demand.
The last time Saudi Arabia waged a price war was in the early months of the pandemic in 2020 when the Kingdom and Russia battled for market share amid collapsing demand.