DUBAI: Volatility on oil markets sparked by Russia’s invasion of Ukraine would be worse without OPEC+, the Saudi energy minister said on Tuesday, insisting the alliance that includes Russia deserves credit. Oil shot up to nearly $140 on supply fears after Russia sent troops into its neighbor on February 24, and the price of crude is still trading at well over $100 a barrel. “I certainly believe that if it wasn’t for OPEC+ existing, we would not be celebrating a sustainable energy market… even with today’s volatility,” Prince Abdulaziz bin Salman said.
“Volatility would have even be worse if OPEC were not together and did not exist,” the Saudi minister told the World Government Summit in Dubai. The 13-member, Saudi-led Organization of the Petroleum Exporting Countries (OPEC) has so far resisted calls to lift production further following the Russian invasion of Ukraine. OPEC+ comprises another 10 countries including Russia. Prince Abdulaziz said OPEC, which also includes Saudi Arabia’s regional foe Iran, was strictly non-political.
“When we get into the OPEC meeting room or building, everybody leaves his politics outside the door of the building, and that culture has been with us,” he said. He also warned that attacks by Yemen’s Iran-backed Houthi rebels on Saudi oil facilities, including a wave of drone and missile strikes on Friday, “put into question our ability to supply the world with the necessary energy requirements”.
The United Arab Emirates’ Energy Minister Suhail Al-Mazrouei called for “trust” from the West, rather than being told to “do this or do that”. “What we need is pragmatism, we need to look at the objective of the energy and what we are asking for, not to tell us do this or do that,” Mazrouei said. “We need their understanding that what we are doing is to the benefit of the consumers,” Mazrouei added, referring to Washington, which he described as an “important partner”.
“When we say this is the right way to do it, we know it from experience, so trust us.” The OPEC+ alliance plans to increase output by 400,000 barrels a day in April, the same pace as in past months, despite calls for it to accelerate production by even more. Since launching its assault on Ukraine, Russia has been hit by a raft of Western sanctions and expelled from world organizations, including the Group of 20 major economies. Mazrouei said that ousting any OPEC+ member from the alliance would not benefit consumers.
“Our aim is to calm the market, trying to come up with volumes as much as possible, and if we are asking anyone to leave, then we are raising the prices, then we are doing something against what the consumers want,” he said. Meanwhile, world oil prices dived and European stocks rallied on Tuesday as apparent progress in peace talks between Moscow and Kyiv sparked hope of an end to the Ukraine conflict.
Oil price fell by more than five percent, with New York’s WTI contract dipping under $100 per barrel as traders eyed easing Russian oil supply fears amid face-to-face talks in Istanbul aimed at resolving the nearly five-week-old war. Russia said it would scale down military activity around Kyiv following the “meaningful” talks in Turkey, as Ukraine’s negotiators called for international guarantees for the country’s security. Ukrainian negotiator David Arakhamia also said there were now “sufficient” conditions for a direct meeting between Ukrainian President Volodymyr Zelensky and Russian President Vladimir Putin.
“It’s looking more promising than at any stage since the invasion,” OANDA foreign exchange platform analyst Craig Erlam told AFP. “Oil prices have fallen sharply on the latest headlines and with talks continuing tonight, there is potential for even more substantial progress to be made,” Erlam said. “While the removal of sanctions is unlikely as part of the peace process, it could remove further risks to Russian exports.” Europe’s major stock markets jumped higher, with Frankfurt soaring 3.5 percent, Paris winning 3.1 percent and London adding 1.2 percent in afternoon deals.
Wall Street also opened slightly higher
The Russian ruble, which tanked after the February 24 invasion, soared by 10 percent against the dollar. “It is the first time in this conflict where we have seen any indications for any form of easing of military action from the Russian side,” SEB analyst Bjarne Schieldrop told AFP. “Until this point the Russian stand has been very firm of its goals,” Schieldrop said. “Now for the first time the market is hoping that there might actually be a way forward not being a full destruction and takeover of Ukraine.”
Lockdown to soaring inflation
Asian stock markets had earlier mostly rallied even before the statements from Istanbul, on investor optimism of progress. However, Shanghai bucked the trend, with stocks falling a day after China’s biggest city and financial hub of 25 million people was placed back in lockdown. Oil prices had fallen on Monday on concerns that the lockdown would affect demand from China, the world’s top crude consumer.
And the yen firmed versus the dollar, after tumbling the previous day to a 2015 low on loose Japanese monetary policy. Soaring inflation remains a concern for investors as it raises expectations that the US Federal Reserve will act increasingly more aggressive in tightening monetary policy. That has sent Treasury yields rocketing, fuelling fears of a sharp economic slowdown. The yen had slumped after the Bank of Japan said it would buy 10-year government bonds to keep yields from running above its target. The move reinforced the divergence between the BoJ and Fed as US officials battle to rein in inflation.-AFP