Saudi Prince’s first OPEC outing brings last-minute oil surprise4 min read . Updated: 07 Dec 2019, 12:52 PM IST
- Even before he was promoted by the crown prince in September, Abdulaziz was a fixture of the Saudi OPEC team for more than thirty years
- His style owes more to Ali Al-Naimi, who ran the Saudi energy minister from 1995 to 2016
VIENNA : Prince Abdulaziz bin Salman has attended OPEC meetings for three decades, but this was the first time he’s been the star turn.
For two days, Saudi Arabia’s new oil minister appeared to have stage fright. As he shuttled between Vienna’s ultra-luxury Park Hyatt hotel and the headquarters of the Organization of Petroleum Exporting Countries, he said almost nothing to the massed reporters ready to transcribe his every word.
He set the tone for the entire meeting. Normally chatty officials said they couldn’t talk. Ministers used backdoor entrances to their hotels. The traditional manic media scrum that opens the meeting was canceled.
Then after two days of often fractious talks on the cartel’s oil policy, he sprung two surprises at the closing press conference: Saudi Arabia will voluntarily cut supply deeper than the new deal requires, and the kingdom in gunning for a $2 trillion valuation for its newly public oil producer, Aramco.
The two are linked. By trying to juice the oil market, he wants to do a favor for his half-brother, Crown Prince Mohammed bin Salman, who’s staked his reputation on the $2 trillion figure. Saudi Aramco will start trading on Riyadh’s Tadawul exchange on Wednesday with a value of about $1.7 trillion.
Even before he was promoted by the crown prince in September, Abdulaziz was a fixture of the Saudi OPEC team for more than thirty years. He gained a reputation as a diplomat, able to bridge the political enmities between members that often have little in common other than an addiction to petrodollars.
Although he’s the ultimate Vienna insider, his first meeting in charge contrasted with his immediate predecessor, Khalid Al-Falih, a brainy but brusque technocrat who was rarely shy of the cameras.
His style owes more to Ali Al-Naimi, who ran the Saudi energy minister from 1995 to 2016 and liked to keep the market guessing to give policy changes more impact.
“The Saudis deliberately managed the expectations of the meeting -- the key was to build a surprise," said Bob McNally, founder of consultant Rapidan Energy, who was one of the few to predict deeper cuts.
The prince also shares Naimi’s taste for consensus building. Al-Falih had leaned heavily on his oil-market alliance with Russia, first forged just three years ago.
Prince Abdulaziz sought to win over OPEC’s established members, persuading those producing over their limit that they need to carry their share of the burden.
One minister said he was very gracious in persuading OPEC sinners such as Iraq and Nigeria to mend their ways. He offered that the Saudis would voluntarily make additional cuts first, allowing others to follow. But there was also an unmistakable threat: if others didn’t comply, Riyadh will quickly change course, delegates said.
“How can we work in dividing these things?" Prince Mohammed said in a Bloomberg TV interview. “It is not going to be a science. It’s science, art and sensibility."
It was decided deeper cuts and better compliance were needed for two reasons: analysts had predicted weak demand growth and new supply from U.S. shale, Norway and Brazil. That meant an overhang was likely early next year. But more important was the Aramco IPO.
Prince Mohammed needed the listing of the state oil producer to be a success, especially after most international investors said they didn’t want to pay his price.
Saudi officials started talking to counterparts about deeper cuts. The Iraqi minister, Thamir Ghadhban, almost gave the game away on Sunday morning, talking to reporters in Baghdad.
Deeper OPEC cuts were discussed at the Abu Dhabi Grand Prix Formula One race the same day, where the crown prince was hosted by his Emirati counterpart Mohammed bin Zayed, according to one OPEC delegate.
Abu Dhabi had agreed to back the IPO with $1.5 billion of the $25 billion Saudi Arabia was trying to raise. The two crown princes decided they needed a solid oil market to back the share sale.
Ministers started to arrive in Vienna on Tuesday, but were giving little away. Almost every trader and analyst that follows OPEC expected a rollover.
The Iraqi minister mentioned deeper cuts one more time when he arrived at Vienna’s Hilton Plaza hotel, but he quickly walked his indiscretion back.
But on Thursday, at a meeting of the Joint Ministerial Monitoring Committee that oversees the alliance, news of deeper cuts began to leak.
But the lack of the press scrum -- canceled at the suggestion of the Saudi delegation -- meant the picture was clear as ministers started the full meeting that afternoon.
They quickly agreed to a cut in principle, but number crunching dragged on late into the evening. The end-of-meeting press conference was also scrapped.
The prince arrived at OPEC’s Vienna HQ on Friday, forecasting a “beautiful day," The talks, now including Russia and other countries from the OPEC group, went more smoothly.
The came the press conference. The oil price popped.
The prince will get another chance to play the expectations game in just 90 days, when an extraordinary meeting has been called for the first time in more than a decade to monitor progress.
He may find it harder to catch the oil market unaware.