Saudi Arabia, Russia urge oil producers to adhere to output limits

Saudi Arabia and Russia have urged other oil producing states to adhere to output cuts agreed earlier this year, amid warnings from the International Energy Agency (IEA) of limited market capacity to absorb excess crude.

Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman on Tuesday "agreed on the importance of all oil-producing countries to continue co-operating and abiding by the Opec+ agreement to achieve these goals for the benefit of both producers and consumers", according to a report from the kingdom's official Saudi Press Agency (SPA).

The pair's discussion via telephone followed worrying signals from the IEA's monthly oil market report on Wednesday of a demand rebound now reducing. Oil prices, which stand at just for $42 a barrel, have fallen around 7 percent since their peak in August.

The IEA said there will be "limited headroom for the market to absorb extra supply in the next few months ... Those wishing to bring about a tighter oil market are looking at a moving target".

Despite OPEC+ states agreeing in April to a record 9.7 million barrels a day in production cuts, several member countries have continued to flout the agreement. The UAE, Iraq and others have produced more oil than their quotas allow them to in recent months.

Aramco's chief executive on Tuesday remained optimistic, predicting the crude oil market could recover to pre-coronavirus levels by 2022.

"The worst is definitely behind us" in the oil market, Aramco's chief executive Amin Nasser told the Energy Intelligence group.

"My prediction is hopefully we will recover by 2022."

After an unprecedented eight percent drop this year, global consumption was set to return to pre-crisis levels in 2023 provided the pandemic was brought under control, the IEA said.

The Covid-19 pandemic has plunged the global economy and oil demand into a tailspin and sparked speculation that the world might have reached peak oil demand.

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