S. Arabia doubts oil recovery, decides to keep taps tight

    LONDON- Last week’s surprise decision by Saudi Arabia and other top oil producers to broadly stick with output cuts despite rising crude prices was influenced by events in an unexpected place – Italy.

    About a year after the country’s financial heart became one of the first European cities to enter a lockdown to curb the spread of COVID-19, Milan is again facing restrictions.

    “Take a look at what is happening in Milan today,” Saudi energy minister Prince Abdulaziz bin Salman Al-Saud told a news conference on Thursday after a meeting of OPEC and its allies.

    “These things, they don’t keep you at ease with the idea of venturing, leaping into an unknown future,” he added.

    Restrictions on movement destroyed up to a fifth of oil demand last year and led OPEC and its allies – known as OPEC+ – to make record output cuts.

    And while global oil futures are back where they were before the pandemic – which for many pundits and investors heralded more production from OPEC+ – the recovery in fuel demand has been tepid as global travel remains subdued.

    Thursday’s meeting saw OPEC+ mostly rolling over its production cuts into April, and Riyadh extending its voluntary 1 million barrels per day (bpd) curb by one more month.

    Russia which had publicly called for higher output was allowed to hike production slightly, along with Kazakhstan. Countries such as Iraq and the United Arab Emirates, which at previous meetings had favoured production hikes, did not raise any objections this time, sources close to the matter said.

    “Overall this was the most bullish outcome we could have expected,” JP Morgan said.