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Another production cut is on the table as OPEC+ cartel meets over the weekend, delegates say

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. That option is on the table, delegates said Friday.

The focus on financial markets underscores the pressure facing the first Saudi prince to run the oil ministry. As his half-brother, Crown Prince Mohammed bin Salman, pursues his ambitious plans to reshape the kingdom’s oil-dependent economy, Abdulaziz must keep crude prices at a level that will make those efforts economically feasible.

“I don’t have to show my cards—I’m not a poker player,” the Saudi oil minister said at an economic forum in Qatar on May 23.

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.

In an unusual decision, OPEC declined to invite reporters from Bloomberg and Reuters to the meeting. Both Wall Street Journal reporters who cover OPEC also were excluded, but other Journal reporters did get invitations.

A spokesman for OPEC didn’t respond to a request for comment.

Abdulaziz is the first among Saudi energy ministers to focus so narrowly on short sellers, according to Homayoun Falakshahi, an OPEC-focused analyst at data-commodity company Kpler. “Such a strategy would have limited success in the long run because it ignores fundamental market realities,” he said.

By actively targeting Wall Street speculators and risking his own reputation in the process, Abdulaziz is charting a course that shows the pressure he faces to keep prices above the $80-a-barrel level that analysts estimate the kingdom needs to finance the ambitious plans of the crown prince, who is the kingdom’s day-to-day ruler.

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.

Abdulaziz has his work cut out to keep prices higher. With few clear options at the moment, his supporters back the oil minister’s strategy to target speculators. The Saudi oil minister has indicated he himself is inspired by Alan Greenspan, the former chairman of the Federal Reserve, who had a reputation for keeping the markets on edge over his policy moves.

“I want the guys in the trading floors to be as jumpy as possible,” Abdulaziz said at a 2021 news conference. “Blame it on my mentor.”

Those who support the Saudi oil minister say he has experience to come out on top, citing Abdulaziz’s deft handling of tough challenges—from a pandemic-induced slump and a price war with Russia in 2020 to crafting a deal between cartel members that allowed the gradual return of production as global economic growth picked up.

Abdulaziz, who turns 63 this year, became the first royal to head the Saudi oil ministry when he was appointed in 2019. Before him, the kingdom’s rulers usually hired technocrats for the job. He joined the ministry in 1987 after graduating two years earlier from the King Fahd University of Petroleum and Minerals, which is known to train the country’s top oil executives. Abdulaziz became a deputy oil minister in 1995, and then assistant oil minister between 2005 and 2017.

At the ministry, Abdulaziz gained a reputation as a hawkish negotiator for bargaining hard at the OPEC table. A cartel official who held talks with him said he once delayed the conclusion of Saudi production-quota negotiations over a single barrel of oil a day, despite the kingdom having a capacity of 12 million barrels a day.

Many industry officials and analysts saw his sudden appointment as Saudi oil minister as a move by the crown prince to consolidate power. Abdulaziz’s predecessor, Khalid al-Falih, was dismissed amid disagreements related to the IPO of Saudi Aramco, the national oil company.

Abdulaziz made an immediate mark by breaking away from a yearslong Saudi tradition of holding broad consultations with other producers and building a consensus when making major oil moves, OPEC delegates said. In the process, he alienated many close allies.

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.