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Signs of disagreement in Saudi Arabia over OPEC+ oil cuts strategy

Saudi Arabia's ongoing OPEC+ oil production strategy now seems uncertain [MediaNews Group/OCR/Getty]

Date of publication: 30 March, 2021

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Despite early reports that Saudi Arabia wishes to maintain the OPEC+ oil production cuts, conflicting accounts have since emerged.
Saudi sources are providing conflicting reports about the continuation of oil production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and allies to shore up prices as COVID lockdowns return.

OPEC and allies - known by the abbreviation "OPEC+ - drastically cut output to a record-low 9.7 million barrels a day or as little as 10% of global output on 12 April last year.

The "oil price war" between Russia and Saudi Arabia - leading up to this decision - nearly caused an irreparable rift between the two countries while coronavirus was decimating fossil fuel markets.

Reuters source familiar with the situation said yesterday that the kingdom wants current cuts of 7 million barrels a day to be maintained into June. This already seems probable as far as May.

Four individuals at OPEC+ briefed the London-based news agency last week that pandemic restrictions would push the intergovernmental body in that direction when it decides on output this Thursday.

Saudi Arabia is also said to be preserving its own voluntary cuts programme, under which it reduces its output by a further million barrels per day.

"[The kingdom's leaders don't] see demand as yet strong enough and want[s] to prevent prices from falling," Reuters' source said.

However, there are signs of disagreement.

Another source told the financial information firm S&P Global that Riyadh has yet to adopt a formal view on continued oil cuts, stating that claims to the contrary "[have] no basis".

Saudi Arabia's ministry of energy did not respond to a request for comment by the time of publication.

It has also been suggested that Moscow is likely to request a small output hike for itself while backing calls for general production cuts.

This follows an unforeseen move by the OPEC+ on 4 March, when Russia and Kazakhstan were previously given slight quota increases.

Read more: Saudi Arabia and Russia locked in war of words over oil price collapse

Whatever decision is made by Riyadh, Reuters suggests caution is required around Iran's growing oil exports and their influence on pricing.

Tehran has continued to avoid US sanctions by selling oil derivatives to the UAE and Egypt, among others.

The rivals have both been subject to growing oil-related tensions in the region in recent years.

Saudi Arabia and Iran have both been involved in rising oil-related tensions in recent years

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