Saudi says OPEC+ can cut output to address oil slump

OPEC stands ready to cut output to correct a recent oil price decline driven by poor futures market liquidity and macro-economic fears, ignoring extremely tight physical crude supply, OPEC’s leader Saudi Arabia said on Monday.

Saudi state news agency SPA cited Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman as telling Bloomberg OPEC+ has the means and flexibility to deal with challenges.

Oil prices have dropped in recent weeks to around $95 per barrel from as high as $120 on fears of a Chinese economic slowdown and a recession in the West.

Earlier this year, prices rose to not far off an all-time high of $147 per barrel after Russia invaded Ukraine and the West responded by imposing tough sanctions on Moscow, triggering fears of the worst energy supply crisis since the 1970s.

Prince Abdulaziz was quoted as saying the oil futures market has fallen into “a self-perpetuating vicious circle of very thin liquidity and extreme volatility”, making the cost of hedging and managing risks for market participants prohibitive.

He also was quoted as saying prices were falling based on “unsubstantiated” information about demand destruction and confusion around sanctions, embargoes and price caps, which the United States has proposed on Russian oil.