Saudi Arabia's energy minister Prince Abdulaziz bin Salman Al-Saud and Russia's energy minister Alexander Novak at the Opec and Opec+ meeting in Vienna, Austria, on December 6 2019. Picture: REUTERS/LEONHARD FOEGER.
Saudi Arabia's energy minister Prince Abdulaziz bin Salman Al-Saud and Russia's energy minister Alexander Novak at the Opec and Opec+ meeting in Vienna, Austria, on December 6 2019. Picture: REUTERS/LEONHARD FOEGER.

London — Saudi Arabia surprised the oil market by promising significant additional production cuts beyond what was agreed with fellow Opec+ members.

After two days of talks in Vienna that had focused on adjusting the group’s quota to formalise recent output levels and redistribute cuts more equitably among members, energy minister Prince Abdulaziz bin Salman sent prices soaring with the promise to take the kingdom’s production down to levels not seen on a sustained basis since 2014, according to data compiled by Bloomberg.

Oil jumped as much as 2.4% to $59.85 a barrel as at 10.09am in New York. Prince Abdulaziz also predicted that Saudi Aramco, which just completed an initial public offering (IPO) at a valuation of $1.7-trillion, would soon soar above $2-trillion.

“We will continue the voluntary cut of 400,000,” barrels per day (bpd), Abdulaziz told reporters in Vienna on Friday. That brings total cuts implemented by Opec and its allies to 2.1-million bpd, he said.

The oil market faces a tricky patch early in 2020. Demand growth is slowing and another big expansion in rival production is coming down the pipeline. Together those factors could create another oversupply that drives international prices back down towards $50 a barrel.

That’s too low for most Opec members to balance their budgets, and would make an unfortunate epilogue for the record-breaking initial public offering of Saudi Arabia’s state oil company, which set the final price of its shares on Thursday.

Bloomberg

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