Prince Abdulaziz bin Salman was a relatively unremarkable member of Saudi Arabia’s OPEC delegation for nearly two decades. But since he became the first royal to serve as the kingdom’s oil minister in 2019, he’s made a name for himself, though not one of his choosing: traders recently dubbed him the “prickly prince”.
From starting oil price wars with Russia in 2020 to contributing to strained US-Saudi relations last year, Prince Abdulaziz has been an assertive steward of the kingdom’s oil policy, but he has been bedeviled with a thin skin to respond to scorn.
To supporters, he is a symbol of a more confident Saudi Arabia under the de facto leadership of his half-brother, Crown Prince Mohammed bin Salman. They believe Prince Abdulaziz got many of the big market calls right, strengthening Saudi influence in the oil market and his Opec+ alliance with Moscow, which has held up despite Russia’s full-scale invasion of Ukraine.
For the Prince’s opponents, however, he tends to overplay his hand and pick unnecessary battles that make more challenging his central role in controlling the price of oil, on which the kingdom’s economic hopes rest.
The most recent forceful move came this week when a slew of journalists, including the entire Reuters and Bloomberg teams, were barred from a crucial meeting scheduled for Sunday at OPEC’s Vienna headquarters. It is the first time that, through decades of wars, price spikes and crashes, OPEC has shut down news organizations en masse.
According to people close to the minister, Prince Abdulaziz’s decision was based on his perception that his view of the market was not being expressed fairly. He believed this contributed to the drop in the reference price for Brent oil to $70 a barrel in recent weeks. But the decision, they said, also reflected a royal temperament unaccustomed to criticism and not getting his way.
Yet turning on the press is seen by some as a sign of desperation. As Saudi Arabia struggles to control the oil market, with prices falling despite two production cuts in eight months, it does not inspire confidence to blame the messenger.
Raad Alkadiri, a veteran Opec watcher at Eurasia Group, said part of Saudi Arabia’s annoyance stemmed from what it saw as a mismatch between the market’s underlying fundamentals – which Opec can influence – and the sentiment of the trader, which is more difficult to bind .
“One could argue that Opec+ has managed the market quite well, but it’s just utter frustration that the success of managing fundamentals has been hammered by sentiment over and over again,” Alkadiri said. “That makes it difficult for OPEC to strengthen its credibility.”
For those close to the prince, there was a sense of disappointment. Many had predicted a strong oil market that would boost the revenues Crown Prince Mohammed needs to implement his economic reforms. Saudi Arabia needs an oil price above $80 a barrel to balance its budget, the IMF said, and to fund some of the “gigaprojects” the crown prince hopes will transform his economy.
Prominent figures such as Pierre Andurand, manager of energy hedge funds, predicted at the beginning of the year that prices would exceed $100 a barrel when the Chinese economy reopened. The International Energy Agency and OPEC itself also predict that the market will tighten significantly in the second half of 2023, which should drive up prices.
But traders don’t seem to want to believe it. Prices have only risen for short periods, such as when OPEC and its allies announced a surprise voluntary production cut in April, only to fall again.
That discount came straight from the playbook of Prince Abdulaziz, who likes to keep the market sharp, an approach that some say runs counter to Opec’s desire to be a stable “central oil bank”.
Traders will be watching closely this weekend whether Prince Abdulaziz pushes for a further production cut or other measures to support the price, or whether the group takes a wait-and-see approach. The latter seemed most likely a week ago, according to analysts and OPEC delegates, but the likelihood of action has increased after prices fell again in recent days.
“Everything is being discussed,” said a senior OPEC delegate from the Gulf. “Still nothing is clear.”
While people close to Prince Abdulaziz say he has remained cheerful overall, with his dry humor on display, he has started to lash out. He warned short sellers who were betting against the price of oil – which he once said would be “like hell” if they doubted him – to “watch out” again last month.
He then resigned himself to the IEA, a group with which Opec has spent years negotiating to reach agreement between oil producers and consumers, describing it as having a “special talent” for getting forecasts wrong.
The danger to Saudi Arabia, traders say, is that Prince Abdulaziz has now effectively thrown the gauntlet on oil speculators. If he doesn’t push for another production cut, prices could fall further.
If Saudi Arabia leads Opec to cut spending, there is no guarantee that Russia will follow suit, as Moscow tries to keep its exports going despite a series of Western measures designed to limit the energy revenue flowing into its war chest.
“Further oil price falls towards $70 a barrel of Brent could increase the likelihood of an additional cut by some Opec+ members. . . although Russia is unlikely to be one of them,” Citigroup analysts said.
One option is to change production baselines — the maximum level at which countries can produce, from which the magnitude of individual production cuts is derived — for Opec+ members, according to two people close to the talks.
The United Arab Emirates has struggled in the recent past with what they believe is a production baseline that underestimates true production capacity. A higher baseline would strengthen its position in OPEC in the long run, even if it agreed to cut further for now. However, some analysts believe the issue is too controversial for Prince Abdulaziz to address and will be pushed back.
“I don’t envy Opec this weekend,” said Eurasia Group’s Alkadiri. “They are caught between a rock and a hard place.”