WSJ: Saudi Oil Minister Takes Combative Stance With Wall Street Speculators

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VIENNA—More than any other Saudi energy minister, Prince Abdulaziz bin Salman has waged war against oil-market speculators.

As the world’s biggest oil producers gather here Sunday to decide on a production plan, the spotlight is on the cartel kingpin’s fixation on Wall Street short sellers. Abdulaziz has lashed out repeatedly this year against traders whose bets can cause prices to fall. Last week he warned them to “watch out,” which some analysts saw as an indication that the Organization of the Petroleum Exporting Countries and its allies may reduce output at their June 4 meeting. A production cut of up to 1 million barrels a day is on the table, delegates said Saturday.

The focus on financial markets underscores the pressure facing the first Saudi prince to run the oil ministry.

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An oil price slide indicates that traders are calling his bluff—betting that it will fall further even if the cartel cuts production again this weekend. Brent crude, the international benchmark, is down more than 20% since OPEC and its allies jolted the market with output cuts in October that the cartel’s members expanded in April.

The Saudi oil minister’s protracted efforts to prop up prices suggest that the world’s biggest oil exporter could be underestimating concerns about a slowing global economy and its ally Russia pumping huge volumes of cheaper oil into the market despite promising not to, industry officials and analysts say. His comments targeting traders often result in short-term market volatility that eventually only undermines his credibility, they added.

For decades, the Saudi-led OPEC projected an image of being a responsible regulator of the global oil market, often touting a production strategy based on longer-term demand-supply fundamentals. In recent years, it struck an alliance with a group of Russia-led oil producers, together known as OPEC+, expanding the cartel’s influence. The 23-member group accounts for more than half the world’s oil production.

This weekend’s OPEC+ meeting is one of the most contentious in recent years. It comes amid growing tensions between two of the world’s biggest oil producers over previously agreed to production cuts. Russia keeps pumping huge volumes of cheaper crude into the market that is undermining Saudi Arabia’s efforts to bolster energy prices, people familiar with the matter say. With Abdulaziz increasingly making big production decisions often without consulting with other OPEC members, differences are growing within the group, they added.

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Mohammed has used his country’s gusher of oil revenue to transform its economy, rework its physical landscape and upend its conservative culture. He has embarked on a development drive at home, launching projects so big that the Saudis call them gigaprojects. These include a Red Sea resort the size of Belgium with Maldives-style hotels hovering above the water and a $500 billion futuristic city in the desert that is 33 times bigger than New York City.

As oil prices hit $100 a barrel last year following the Russian invasion of Ukraine, the kingdom accelerated those efforts. In recent months, Saudi economic advisers have privately warned senior policy makers that the kingdom needs elevated oil prices for the next five years to keep spending billions of dollars on projects that have so far attracted meager foreign investment.

Analysts at Morgan Stanley in May lowered their Brent forecast for year-end to $75 a barrel from $87.50. They said the market faces two challenges beyond the slowing global economy: a burst of demand in China has probably played out, and Russia keeps defying forecasts that its production will collapse. Some traders are now betting prices will fall below $70 in the next two years.

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In March 2020, with the Covid-19 pandemic shutting down much of the world’s travel, Abdulaziz clashed with Russia’s then-energy minister, Alexander Novak, who had been a close friend of his predecessor, Falih. “You will regret this day,” Abdulaziz warned Novak when he refused to cut output at an OPEC+ meeting. A resulting price war between the two oil giants led to crude prices turning negative for the first time in history.

Abdulaziz also fell out with Amos Hochstein, the White House’s energy envoy, after the kingdom refused Washington’s request to increase production to tame rising prices and then abruptly cut output, which led to U.S. accusations that Riyadh was siding with Moscow in Russia’s invasion of Ukraine, said people who know both men.

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Abdulaziz’s warnings to speculators often created volatility and panic in the market, they noted. They added that while Saudi Arabia has been proactive in cutting supplies ahead of a possible fall in demand, it has often failed to act quickly when supply is tightening in recent years, suggesting more market upheavals to come.

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