Prince Abdul Aziz bin Salman kept a relatively low profile for nearly two decades as part of Saudi Arabia's delegation to the Organization of the Petroleum Exporting Countries (OPEC), but he has risen to unwilling prominence since becoming the first royal to become the country's oil minister in 2019. Traders have recently taken to calling him “the prickly prince.”
Prince Abdulaziz has actively managed Saudi oil policy, including starting an oil price war with Russia in 2020 and contributing to strained relations between the United States and Saudi Arabia last year, but he has also suffered from a tendency to react nervously when disrespected.
To his supporters, Prince Abdul Aziz represents a Saudi Arabia that has grown more confident under the effective leadership of his half-brother, Crown Prince Mohammed bin Salman, who he credits with getting many of the market's big predictions right and strengthening Saudi influence over the oil market and the OPEC+ alliance with Moscow, which has endured despite Russia's all-out invasion of Ukraine.
But to the prince's critics, he has a tendency to overreach and pick unnecessary fights, making his central role of controlling oil prices, on which the kingdom's economic hopes depend, even more difficult.
In the latest tough action this week, scores of journalists, including the entire Reuters and Bloomberg news agencies, were barred from attending a key meeting at the Organization of the Petroleum Exporting Countries headquarters in Vienna on Sunday, the first time the OPEC has banned media outlets en masse since decades of war, price hikes and crashes.
Prince Abdul Aziz's decision stemmed from what he felt was his market views not being fairly assessed, according to a person close to the minister, which he believed contributed to the price of Brent crude falling to $70 a barrel in recent weeks. But the decision also reflects the temperament of a royal family that is unaccustomed to criticism and does not like to get its own way, the person said.
But blaming the media is seen by some as a sign of desperation – and does not inspire credibility as Saudi Arabia struggles to tame the oil market, with prices falling despite two production cuts in eight months.
Raad al-Kadiri, a veteran OPEC watcher at Eurasia Group, said part of Saudi Arabia's frustration stems from what it sees as a mismatch between market fundamentals that OPEC can influence and trader sentiment that is harder to control.
“One could argue that OPEC+ has managed the market quite well, but it is entirely frustrating to see how their successful fundamental management has been hit time and again by emotions,” Al-Kadiri said. “That makes it difficult for OPEC to shore up its credibility.”
Those close to the crown prince were disappointed. Many had expected the oil market to boom to raise the revenues Prince Mohammed needs to implement the economic reforms. According to the IMF, Saudi Arabia needs oil prices above $80 a barrel to balance its budget and fund some of the “megaprojects” the crown prince wants to see in the economic reforms.
Earlier this year, prominent figures such as energy hedge fund manager Pierre Andurand predicted that crude prices would surpass $100 a barrel as China reopens its economy. The International Energy Agency and OPEC itself also predict that the market will tighten significantly in the second half of 2023, driving up prices.
But traders don't seem to want to believe it. Prices only rose briefly, such as when OPEC and its allies announced sudden voluntary production cuts in April, before falling again.
Some see the production cuts as typical of Prince Abdulaziz's preference for keeping markets on edge, and at odds with OPEC's desire to be a stable “central bank of oil.”
Traders will be watching this weekend to see whether Prince Abdul Aziz pushes ahead with further production cuts or other measures to boost prices, or whether the group takes a “wait and see” stance. The latter seemed more likely just a week ago, analysts and OPEC representatives said, but action has become more likely after prices fell again in recent days.
“Everything is under discussion,” one of OPEC's top Gulf representatives said. “Nothing is clear yet.”
OPEC ministers met briefly on Saturday afternoon ahead of an OPEC+ meeting that also includes Russia and other allies that is due to decide production policy. OPEC representatives said production cuts of up to 1 million barrels per day would probably be discussed on Sunday, but no agreement was reached.
Prince Abdulaziz's only comments to reporters on Saturday were to note the fine weather in Vienna. He was smiling and holding hands with his Emirati counterpart, Suhail Al Mazrouei, as he left OPEC headquarters.
People close to Prince Abdul Aziz say he has generally been in good spirits and exhibited dry humor, but he has also turned aggressive, and last month he again warned short sellers betting on falling oil prices to “be careful,” after previously telling them they would “get very badly hurt” if they doubted him.
And he slammed the IEA, the body that OPEC has spent years facilitating dialogue to find common ground between oil-producing and -consuming countries, saying the agency has a “special knack” for getting its forecasts wrong.
The danger for Saudi Arabia, traders said, is that Prince Abdul Aziz has effectively issued a gauntlet to oil speculators, and prices could fall further unless he presses for further production cuts.
Even if Saudi Arabia were to lead OPEC in cutting production, there is no guarantee that Russia would follow suit, as Russia seeks to maintain exports despite a series of Western measures aimed at limiting the amount of energy revenues that go towards funding its military.
“A further decline in Brent crude prices towards $70 a barrel could increase the likelihood of further production cuts by some OPEC+ member states, although Russia is unlikely to be included,” Citigroup analysts said.
One option would be for OPEC+ member states to change their production standards – the maximum level each country can produce, from which their individual production cuts are determined, according to two people close to the talks.
The UAE has recently bristled at production standards that it believes underestimate the country's actual production capacity. Raising production standards would strengthen the country's position in OPEC in the long term, even if it agreed to further cuts in the short term. But some analysts believe the issue is too contentious for Prince Abdulaziz to address and will likely be put off for now.
“I don't envy OPEC this weekend,” Eurasia Group's al-Kadiri said. “They're caught in the middle.”
