Saudi Arabia has slammed OPEC’s once-traditional role has undermined OPEC’s role of managing higher-cost producers, particularly U.S. shale drillers, by raising its production and crashing prices in the process.
This move comes on the heels of OPEC’s next general meeting in June where analysts are already in doubt of any need to look up to the cartel to cut output in order to boost price.
Already, outages in Nigeria and Canada, had sent output crashing boosting price before Saudi Arabia’s new move which had crashed prices again.
Under the economic plan known as Vision 2030 promoted by Saudi Arabia king’s powerful son, Deputy Crown Prince Mohammed bin Salman, the government is signaling it wants to cut the kingdom’s economy off oil revenue, lessening the need to manage prices. Moreover, the planned privatization of Saudi Arabian Oil Co. will make the nation the only member of the Organization of Petroleum Exporting Countries without full ownership of its national oil company.
“The main take-away from Saudi Vision 2030 is that there’s just no role for OPEC. Or, you can have an OPEC without Saudi Arabia, which just isn’t much of an OPEC” Seth Kleinman, head of European energy research at Citigroup Inc. in London, recently told Bloomberg.
The first change of oil ministers in more than 20 years may also recast the country’s relationship with OPEC. The group’s 13 members, which contribute about 40 percent of the world’s supply, will meet in Vienna on June 2.
King Salman on May 7 replaced Ali al-Naimi, the most influential voice in OPEC and the architect of current Saudi oil policy. While there’s likely to be considerable continuity, his replacement, Khalid Al-Falih, is an ally of Prince Mohammed. When producers considered freezing output to curb a global glut in April, Mohammed’s view that no deal was possible without Iran prevailed, and talks collapsed.
“We don’t care about oil prices,” Prince Mohammed said in an April 25 interview in Riyadh. “$30 or $70, they are all the same to us. We have our own programs that don’t need high oil prices.”
Benchmark Brent crude traded at $47.94 a barrel on Tuesday at 8;55 a.m in London, while OPEC’s daily basket price stood at $44.07 a barrel as at Monday.