Saudi Arabia’s energy minister recently announced that the decision to extend crude oil supply cuts with Russia is not aimed at increasing prices. This comes as Brent futures approach $95 a barrel, with some analysts predicting further increases to triple digits.

During a speech at the World Petroleum Congress in Calgary, Saudi Energy Minister Prince Abdulaziz bin Salman stated that the decision is based on data and clarity, rather than an intention to manipulate prices. He emphasized the importance of making the right decision at the appropriate time.

Several members of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, have voluntarily reduced their combined oil production by 1.66 million barrels per day until the end of 2024. In addition to this, Saudi Arabia and Russia have announced respective reductions of 1 million barrels per day of production and 300,000 barrels per day of exports until the end of the year.

Saudi Arabia, being the world’s largest seaborne oil exporter, heavily relies on hydrocarbon revenues to support economic diversification initiatives.

Oil prices have been on the rise after supply cut announcements in recent months. There are concerns about a potential volume deficit in the latter part of 2023. Ice Brent crude futures with November delivery are currently trading at $95.00 per barrel, indicating a possible return to oil prices at $100 per barrel.

Chevron CEO Mike Wirth expressed the likelihood of oil prices crossing into triple digits in an interview. He acknowledged the tightening supply and decreasing inventories, suggesting a positive trend towards higher prices. However, he also noted that while it may impact the global economy, the underlying drivers of the economy remain strong.

Rising energy prices have also contributed to higher inflation, especially following geopolitical events such as the war in Ukraine and Europe’s reduced access to sanctioned Russian seaborne oil supplies.

Saudi Energy Minister Prince Abdulaziz criticized the International Energy Agency (IEA), accusing it of political advocacy rather than accurate forecasting. He dismissed the IEA’s prediction that oil demand would peak before 2030 due to the growth of electric vehicles.

The CEO of Saudi oil company Aramco, Amin Nasser, also questioned the notion of peak oil demand and highlighted the importance of carbon capture in the transition to cleaner energy sources.

The relationship between Saudi Arabia and the IEA has been strained due to differences in climate change positioning. The IEA advocates for no investment in new fossil fuel supply projects to prevent a climate crisis, while Saudi Arabia promotes a dual approach of investing in oil and gas as well as renewables to avoid an energy deficit.

This disagreement comes ahead of the United Nations climate change conference, which will take place in the United Arab Emirates, a major oil producer. The conference is expected to address crucial climate-related issues.

Higher oil prices have historically put pressure on the administration of U.S. President Joe Biden. However, the U.S. has remained relatively silent on the recent OPEC+ reductions. This silence may be due to the need to balance domestic interests with foreign policy objectives, including normalizing relations between Israel and Saudi Arabia.

Saudi Arabia’s close ties with Russia, a Western-sanctioned OPEC+ member, further complicate the U.S.’s position. The stability of the global energy market has been attributed to specific agreements between Russia and Saudi Arabia regarding oil production reductions and limitations on raw material deliveries.