Saudi Energy Minister Abdulaziz bin Salman on October 5, 2022.
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Saudi Arabia’s energy minister says the prominent OPEC+ oil producer alliance is waiting for concrete action from the central bank on interest rates before considering the potential impact on the energy demand landscape.
“Central banks, with all due respect, they fluctuate [on their messaging]” Prince Abdulaziz bin Salman said during a news conference on Sunday in response to a question about whether OPEC+ supply cuts could re-increase global inflationary pressures at a time when central banks are reining in consumer price rises and moving timidly toward a possible interest rate cut .
Earlier on Sunday, the OPEC+ group – which includes the Organization of the Petroleum Exporting Countries and its allies – agreed to extend official production cuts until the end of next year. A subgroup of the coalition will extend two additional levels of additional voluntary supply reductions: This subgroup of eight countries will extend a tranche of 1.7 million barrels per day through 2025 and a larger tranche of 2.2 million barrels per day. Daily average until the end of the third quarter.
The production strategy decisions come at a time when OPEC’s own forecasts show demand increasing by 2.25 million barrels per day, according to May’s monthly oil market report. The upcoming summer season and the end of refinery maintenance in China are also likely to increase demand for crude oil in the short term.
Energy costs rose worldwide as a result of Russia’s full-scale invasion of Ukraine, exacerbating the economic downturn that followed the Covid-19 pandemic. Global institutions have previously cited energy prices as a reason for inflation concerns. In turn, accumulated inflation has dampened oil demand.
Expectations have risen with the passage of time and the number of likely interest rate cuts by global central banks, whose countries are relentlessly struggling with stubborn inflation. The European Central Bank is widely expected to implement a long-awaited cut at its meeting on June 6, even as euro zone inflation recently posted an annual rise from 2.4% in April to 2.6% in May .
The Federal Reserve was also expected to ease monetary policy in the near term, but a recent wave of stronger-than-expected economic data and guidance from policymakers clouded that outlook.
“Show me a central banker who… [has] “A determination to give people a forecast of when, where and how they will cut interest rates,” Saudi Arabia’s Abdulaziz bin Salman said amid continued ambivalence, stressing that the group “expects more certainty about macroeconomic developments , which is likely to happen. “Increase demand with a clear path.”
The OPEC+ coalition has repeatedly stated that it will respond promptly and flexibly to changes in the oil market if necessary. On Sunday, the Saudi energy minister defended that the alliance’s latest production strategy was based on the current market situation.
“As it is today, we believe that we need to give clarity to the market about what signals we are sending out and it is paramount that people take an example of what we are doing,” he said.
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2024-06-02 17:02:12
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