India's oil minister has said Opec+ "supply-side management" will have consequences for demand, because the global economy is not in a position to shoulder high prices.
Speaking to Argus in Abu Dhabi, Hardeep Singh Puri dismissed the argument made by, among others, Opec heavyweights Saudi Arabia and the UAE that higher prices are needed to stimulate the investment necessary to counter supply decline.
"When you take off 5.2mn b/d [from the market], it is not due to lack of investment," he said. "You've taken it out because you want to do supply-side management."
He did not elaborate on the 5.2mn b/d figure. The cumulative effects of the Opec+ agreement and the extra voluntary cuts made by Saudi Arabia and Russia have removed 4.7mn b/d of supply by Argus calculations, although there has been underproduction from other member countries.
Riyadh and Moscow today reaffirmed their commitment to their voluntary cuts — 1mn b/d of production from Saudi Arabia and 300,000 b/d in exports from Russia — until the end of the year.
This is not the first time that Puri has said Opec+ decisions to cut supply would have a negative effect on the economy, but he stressed he is not criticising any single policy.
"It's a sovereign right to determine how much you want to [produce], but don't be unmindful of the consequences," he said. "And it can become a self-fulfilling prophecy, that the demand will drop because people don't have the capacity to sustain it," citing the 2008 price crash that he said was "not useful for producer or consumer."
"If you think that an unrealistic price can be taken and sustained by the market, then I place the following facts before you," he said. "It is not my opinion, the fact is half the world is either under, in, or slightly below recession. Even the economies which are not in recession are flirting with the whole idea of recession."
Puri said he would prefer an oil price between $75/bl and $90/bl, given the "inflationary situation".
The front-month Ice November crude contract today fell below $90/bl for the first time in almost a month, and just a couple of weeks after talk of $100/bl was in the air.
For our full interview with Indian oil minister Hardeep Singh Puri, please click here.
