OPEC+ alliance not shifting strategy to market share battle: Saudi energy minister

OPEC and its allies will continue to manage the oil market, even with plans by Saudi Arabia to boost exports in coming years, the kingdom's energy minister Prince Abdulaziz bin Salman said June 6 during the St. Petersburg International Economic Forum.

OPEC+ would provide the market with a "clear path" on how any additional barrels might be supplied, adding that the group can adjust policy according to the market's needs, Prince Abdulaziz said.

Saudi Arabia, which claims a production capacity of 12 million b/d but has in recent months pumped just 9 million b/d under the OPEC+ accord, plans to boost oil exports by about 1 million b/d over the next three years by displacing liquid burn in its power sector. Development in the Neutral Zone shared with Kuwait could also add production capacity.

"Be it as it may, be it increasing of capacity, increasing of export capacity over three years, we need to have a clear path on how you will produce these volumes," he said.

OPEC+ continues to pursue an aggressive crude production cut strategy -- an indicator that supporting prices is currently its main priority.

But crude prices have fallen since the group announced June 2 it would extend its production cuts through September but begin easing some of them gradually from October.

Platts, part of S&P Global Commodity Insights, assessed Dated Brent at $75.92/b on June 5, down from $80.18/b ahead of the June 2 meeting, and a 2024 peak of more than $93/b in early April.

Analysts with Commodity Insights said in a note June 5 that the OPEC+ decision was "neutral" for the market, but added that there was "greater downside price risk over the rest of the year if OPEC+ does follow through with the increase announced June 2."

OPEC+ is extending its supply cut agreement until the end of 2025. Voluntary cuts implemented by several producers will remain in force through the third quarter, but then gradually will be unwound.

A consequence of the cuts is that producers outside OPEC+ have seized the opportunity to boost output, threatening OPEC+'s ability to secure market share in the long term.

Plans to bring barrels back to market could be a sign that concerns about market share may outweigh price concerns in the future. However, analysts continue to see high chances of the group putting off easing cuts until 2025.

"We believe 2024 is not the year to focus on market share and assume that both Saudi Arabia and Russia would be willing to roll over their 9.0 million b/d quotas through the end of this year, if demand wasn't strong enough to absorb the barrels," JP Morgan said in a note released after the latest decisions were announced.

Demand optimism

Despite its production cuts, OPEC continues to forecast high levels of global crude demand in 2024 and 2025, but officials have said the group would remain cautious with its supply policy until clearer signs of economic growth emerge and central banks start lowering interest rates.

"It's important, as we heard, to remain focused on fundamentals. We do still believe that demand for oil is good and resilient," OPEC Secretary General Haitham al-Ghais said, speaking in St. Petersburg.

OPEC forecasts global oil demand growth of 2.2 million b/d in 2024. This is significantly higher than estimates from other agencies.

"In the first quarter, demand was already at 2.3 million b/d higher, that's typically the worst period of the year," the OPEC secretary general said.

OPEC's estimates are significantly higher than Commodity Insights estimate of 1.7 million b/d and the IEA's estimate of 1.1 million b/d for 2024. OPEC and the IEA will release their latest monthly oil market reports including demand forecasts on June 11 and June 12, respectively.