OPEC's Barkindo Vows to Maintain Crude Market Stability, but Saudis Worry About Supply Shortage

Saudi's energy minister has denied reports that he wants to jack up prices to bolster the IPO of Saudi Aramco. File Image / Pixabay

Tuesday's announcement that U.S. president Donald Trump was exiting his country from the Iran nuclear deal may have caused plenty of hand-wringing among crude analysts, but it didn't seem to overly bother Mohammad Barkindo, secretary general for the Organization of the Petroleum Exporting Countries (OPEC): when asked about the consequences of the brash billionaire's move, he told Reuters that his cartel's efforts to stabilize the oil market will be maintained.

Specifically, he remarked that "We have confidence in our leaders, within and outside OPEC, who have strongly supported our joint efforts with our non-OPEC partners to assist the oil market to restore stability after the worst oil cycle in history, to continue to provide leadership in these uncertain times."

"The rebalancing of the oil market is a long process that is now in its 4th year; it is still a work in progress and requires sustainability."

If Barkindo's rhetoric seemed overly familiar, so too were remarks made by OPEC's de facto leader, Saudi Arabia, whose oil minister, Khalid al-Falih, told Reuters after a meeting with Japan's trade minister that "We are concerned about tight spare capacity nowadays....but we feel the industry is in better shape than when we started in 2016, and although we are seeing that improvement, we certainly don't feel we are where we need to be with complete market stability."

However, Falih broke away from predictable bromides by taking the opportunity to discount reports that Riyadh wants to oil to hit at least $80 per barrel this year, in order to improve the fortune of its impending IPO of state-owned Saudi Aramco: "For sure we are not targeting a price; our objective all along has been to bring stability, rebalancing and equilibrium back to the oil markets."

He also denied that the aim of OPEC's cuts was to get storage levels back to the five-year average, "certainly not the rolling five-year average, because the rolling five-year average has been inflated by the glut that's been around since 2014."

Falih is no stranger to sending mixed signals to the media, one of many examples occurring in February, when he told Riyadh reporters that with regards to the OPEC cutbacks it's better to "stay the course and make sure that inventories are where the industry needs them" - and almost in the same breath he admitted that finding reliable inventory data has been a challenge to more than a year of output cuts designed to end the global glut.