Opec+ and Saudi will stay cautious on oil output: Vitol

Saudi Arabia’s larger-than-expected rise in oil prices is a signal it will continue resisting US pressure to pump faster, according to Vitol Group.
Saudi Aramco hiked December prices for customers in Asia, the US and Europe on Friday, a day after Opec+ stuck to its plan to boost output only at a gradual pace. The state producer’s month-on-month increase in the official selling price, or OSP, for its main Asian grade was the third-largest this century, according to data compiled by Bloomberg.
“They are unlikely to change stance,” Mike Muller, the head of Asia for Vitol, the world’s biggest independent oil trader, told Bloomberg on Sunday.
US President Joe Biden called on Opec+, a 23-nation alliance led by Saudi Arabia and Russia, to speed up the easing of supply curbs it began in early 2020 with the onset of the coronavirus pandemic.
Oil has climbed around 60% this year to more than $80 a barrel because of the global economic recovery and Opec+’s cuts. That’s hit American drivers by pushing gasoline up to a seven-year high of $3.70 a gallon.
Saudi Arabia “went further with the OSPs than anyone expected,” Muller said earlier on a webinar. “That was a signal to those that were critiquing Opec+ for not putting enough oil on the market. The Saudis felt they can indeed make higher prices stick.”
On Thursday, the Organization of Petroleum Exporting Countries and partners decided to keep raising daily crude output by 400,000 barrels a month. Biden’s Energy Secretary, Jennifer Granholm, said the US is considering releasing crude from its strategic petroleum reserves as a response. The White House may seek to co-ordinate any sell down with other major importers such as Japan and China.
“The market does seem to have an expectation that there’ll be some form of SPR release,” Muller said. Still, “the market is in a position where inventories are low and supplies are tight. The Saudis are pricing their oil accordingly.”
Opec+ has argued its stance is justified because resurgent coronavirus outbreaks could hit consumption. China is still “grappling” with cases, “and ‘grappling’ in China always means oil-demand reduction,” Muller said.
Even if Opec+ did want to raise production faster, it would be hindered by the lack of spare capacity among most members, Muller said. Some, including Angola and Nigeria, are already struggling to meet the group’s current targets.
“The peak of their production would seem to be in the past,” Muller said of the two countries.