DUBAI, May 11 (Reuters) - Saudi Arabia’s deeper oil output cuts in June are designed to expedite draining a global supply glut and rebalancing the oil market, the kingdom’s energy minister told Reuters.
Earlier on Monday, Saudi Arabia made a surprise announcement that it will voluntarily deepen oil output cuts from June by 1 million barrels per day.
Prince Abdulaziz bin Salman said Saudi Arabia “wants to be ahead of the curve” and he sees signs of gradual demand recovery as countries move to ease restrictions on movements imposed over the past months to stop the spread of the coronavirus epidemic.
“We want to expedite the process of returning back to normal ... demand is picking up. We want to make sure that we are helping to expedite the equilibrium between the supply and demand,” he told Reuters in a telephone interview.
“We are taking a proactive role and we are encouraging others to do the same,” he said, adding that Riyadh’s deeper cuts are “not conditional or restricted to us alone”.
Low oil prices are pressuring the kingdom’s budget and global demand remains weak due to global lockdowns to contain the coronavirus. On Monday, Saudi Arabia said it would triple value added tax and suspend a cost of living allowance for state workers in an austerity push to counter the oil slump and the impact of the virus on the economy.
“We are doing everything in the realm to manage our fiscal policy including being prudent to accommodate this situation and we are trying to move in terms of stabilizing the market,” Prince Abdulaziz said.
OPEC and its allies, a group known as OPEC+, agreed last month to reduce output by 9.7 million bpd for May and June, a record production cut.
Asked whether the deeper cuts by Saudi Arabia, which both the UAE and Kuwait have joined by pledging more reductions, would continue beyond June, Prince Abdulaziz declined to comment, but struck an optimistic tone on the market’s future.
“If things are continuously hopefully improving, we will scale back (the cuts) as we have in the (OPEC+) agreement,” he said, adding that he would be “more than surprised” if by time OPEC+ meet next in June “the picture may not be more brighter.”
Producers will slowly relax curbs after June, although reductions in supply will stay in place until April 2022. OPEC+ meet next in early June to decide on its output policy. (Reporting by Rania El Gamal; editing by David Evans)