Saudi Arabia warned Opec and allies outside the oil cartel against unleashing more barrels on to a fragile market, putting the kingdom at loggerheads with rival Russia.
Prince Abdulaziz bin Salman, the kingdom’s oil minister, told officials from the 23-member Opec+ group, which includes Russia, that joint efforts to restrict production and manage the sharp fall in demand due to the coronavirus pandemic had to be maintained.
Tensions have simmered for months about how quickly to restore supplies after the group last year cut more than 10 per cent of global output, with Russia keen to raise production to protect its market share.
On Monday, a virtual meeting of oil ministers was adjourned without a resolution between the two sides. Talks are due to continue on Tuesday as delegates hope to hammer out an agreement for production in February.
“Do not put at risk all that we have achieved for the sake of an instant, but illusory, benefit,” Prince Abdulaziz said. “Our job is not yet done.”
Alexander Novak, Russia’s deputy prime minister, told the conference the current rollout of vaccination programmes would only “accelerate”. This, he said, might pave the way for a recovery in oil production.
Oil prices retreated from earlier highs as the ministerial meeting got under way and the split among producer nations was apparent.
Brent crude eased to as low as $50.75 a barrel, a pullback from the nine-month high of $53.33 struck earlier in the day. West Texas Intermediate, the US marker, dipped as low as $48.05.
Oil ministers from the Opec+ group face a complex outlook for crude demand, with the reopening of economies in some parts of the world but renewed lockdowns in others.
The global rollout of vaccines has driven positive sentiment and pushed prices back above $50 a barrel, but case numbers in countries such as the UK have accelerated sharply, prompting new government curbs.
“Infection rates are still high in western industrialised countries, meaning that lockdowns will have to be extended in many places,” said Barbara Lambrecht, an analyst at Commerzbank. “The buoyant start to the year on the oil market risks faltering.”
Last month Opec+ decided to raise production by 500,000 barrels a day from January.
The increase was less than the 2m b/d rise initially agreed as part of a gradual easing of the cuts deal that lopped 9.7m b/d off the market at the height of the pandemic last year.
While Russia has pushed to raise production by a further 500,000 b/d, Opec’s de facto leader Saudi Arabia and other producers in the cartel are keen to maintain January’s levels.
Helima Croft at RBC Capital Markets said: “The prudent course is to put on hold plans to increase output given the unpredictable trajectory of the virus.”
The group’s research arm has also further downgraded its expectations for oil demand this year.
Prince Abdulaziz added: “As we see light at the end of the tunnel, we must — at all costs — avoid the temptation to slacken off our resolve.” The new coronavirus variant, he said, was “worrying and unpredictable”.
A split between Saudi Arabia and Russia early last year over how to respond to the pandemic, resulted in Riyadh ultimately launching a price war when Moscow failed to back other producers in making large cuts to output. The move exacerbated the crash in crude prices as demand-sapping lockdowns spread across Europe and the Americas, before a US-backed agreement was reached in April to make record supply cuts.
Although analysts say a deal for February is still likely to be agreed this week, unity in the group is weakening with output decisions now being made monthly rather than over longer periods.