Saudi Arabia’s ‘prickly prince’ of oil bristles as crude price slides

Prince Abdulaziz bin Salman spent virtually twenty years as a comparatively low-profile member of Saudi Arabia’s Opec delegation. But since changing into the primary royal to serve as the dominion’s oil minister in 2019, he has made a reputation for himself, although not one of his selecting: merchants have not too long ago taken to calling him the “prickly prince”.

From beginning oil price wars with Russia in 2020 to contributing to strained US-Saudi relations final yr, Prince Abdulaziz has been an assertive steward of the dominion’s oil coverage, however one beset by a thin-skinned tendency to react to slights.

To supporters, he’s a logo of a extra assured Saudi Arabia below the de facto management of his half-brother, Crown Prince Mohammed bin Salman. They consider Prince Abdulaziz has obtained many of the large market calls proper, reinforcing Saudi affect over the oil market and its Opec+ alliance with Moscow, which has endured regardless of Russia’s full-scale invasion of Ukraine.

To the prince’s detractors, nonetheless, he tends to overplay his hand and decide pointless fights that make his central function of managing the oil price, on which the dominion’s financial hopes relaxation, more difficult.

The newest forceful transfer got here this week when a swath of journalists, together with the complete groups from Reuters and Bloomberg, had been banned from a vital assembly set to happen on Sunday at Opec’s Vienna headquarters. It is the primary time that Opec, by way of many years of wars, price spikes and crashes, has excluded information organisations en masse.

The resolution by Prince Abdulaziz stemmed, folks near the minister stated, from his notion that his market view was not being given a good airing. He believed this was contributing to the autumn within the benchmark Brent crude price in direction of $70 a barrel over current weeks. But the choice additionally mirrored, they stated, a royal temperament unaccustomed to criticism and to not getting his personal approach.

Yet turning on the press has been seen by some as an indication of desperation. As Saudi Arabia struggles to bend the oil market to its will, with costs falling regardless of two manufacturing cuts in eight months, resorting to blaming the messenger doesn’t encourage confidence.

Raad Alkadiri, a veteran Opec-watcher at Eurasia Group, stated half of Saudi Arabia’s annoyance stemmed from what it noticed as a mismatch between the underlying fundamentals of the market — which Opec can affect — and dealer sentiment, which is a more durable beast to corral.

“You can argue Opec+ have managed the market pretty well, but there’s just an utter frustration that the success of the management of the fundamentals is being hammered time and again by sentiment,” Alkadiri stated. “That makes it difficult for Opec to reinforce its credibility.”

For these near the prince, there was a way of disappointment. Many had projected a robust oil market that may increase the revenues that Crown Prince Mohammed must implement his financial reforms. Saudi Arabia requires an oil price above $80 a barrel with a purpose to stability its funds, in accordance with the IMF, and fund some of the “giga-projects” the crown prince hopes can rework its financial system.

Prominent figures such as power hedge fund supervisor Pierre Andurand predicted at first of the yr that costs would exceed $100 a barrel as China’s financial system reopened. The International Energy Agency and Opec itself additionally venture that the market will tighten considerably within the second half of 2023, which ought to increase costs.

But merchants appear unwilling to consider it. Prices have rallied just for temporary durations, such as when Opec and its allies introduced a shock voluntary manufacturing minimize in April, solely to slide decrease once more.

That minimize was straight from the playbook of Prince Abdulaziz, who likes to maintain the market on its toes, an method some see as being at odds with Opec’s need to be a steadying “central bank of oil”.

Traders can be watching intently this weekend to see whether or not Prince Abdulaziz pushes for an extra manufacturing minimize or different measures to prop up the price, or if the group adopts a “wait and see” method. The latter appeared most certainly solely every week in the past, in accordance with analysts and Opec delegates, however the probability of motion has elevated after costs slipped decrease once more in current days.

“Everything is under discussion,” stated one senior Opec delegate from the Gulf. “Still nothing is clear.”

Ministers from Opec met briefly on Saturday afternoon, forward of the Opec+ assembly — which can embrace Russia and different allies — the place manufacturing coverage can be determined. Opec delegates stated a minimize of as much as 1mn barrels a day would most likely be mentioned on Sunday, however nothing had been agreed upon.

Prince Abdulaziz’s solely remark to the press on Saturday was to comment on the fantastic climate in Vienna. He left Opec’s headquarters smiling and holding arms with the UAE minister, Suhail al Mazrouei.

While folks near Prince Abdulaziz say he has typically remained in good spirits, along with his dry humour on show, he has taken to lashing out. He warned quick sellers betting in opposition to the oil price — who he as soon as stated can be “ouching like hell” in the event that they doubted him — to “watch out” as soon as once more final month.

He then laid into the IEA, a gaggle that Opec has spent years fostering dialogue with to search out frequent floor between oil producers and shoppers, describing it as having a “special talent” for getting forecasts incorrect.

The hazard for Saudi Arabia, merchants say, is that Prince Abdulaziz has now in impact thrown down the gauntlet to oil speculators. If he doesn’t push for an additional manufacturing minimize, then costs might fall additional.

If Saudi Arabia does lead Opec into cuts, there is no such thing as a assure that Russia will comply with, as Moscow tries to maintain its exports going regardless of a swath of western measures designed to limit the power revenues flowing into its struggle chest.

“Further oil price declines towards $70 a barrel for Brent could increase the likelihood of an additional cut by some Opec+ members . . . though Russia is unlikely to be one of them,” stated analysts at Citigroup.

One possibility is to change manufacturing baselines — the utmost stage international locations can produce at, from which the dimensions of particular person manufacturing cuts is derived — for Opec+ members, in accordance with two folks near the talks.

The United Arab Emirates has bristled within the current previous at what it believes to be a manufacturing baseline that underestimates its actual output capability. A better baseline would strengthen its place in Opec long-term, even when it agreed to chop additional for now. Some analysts consider the difficulty is simply too contentious for Prince Abdulaziz to deal with, nonetheless, and that it will likely be pushed again.

“I don’t envy Opec this weekend,” stated Alkadiri of Eurasia Group. “They’re caught between a rock and a hard place.”

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