Saudi Arabia’s energy minister says that OPEC and its allies are prepared to quickly respond to a global economic slowdown.
Khalid Al Falih told CNN Business’ Emerging Markets Editor John Defterios that while he doesn’t “see a big economic recession,” corrective actions are “easily within our control.”
“If we see a slowdown … it’s going to be a small slowdown that oil markets can well absorb with adjustments to supply,” Al Falih said during an interview Monday.
Oil prices have trended higher since OPEC and partners including Russia agreed in December to slash production. Opposed by the Trump administration, the deal called for the removal of 1.2 million barrels a day from world markets starting this month.
The agreement has helped support prices despite new evidence of weakness in major economies including China and Germany.
Al Falih said the group stands ready to cut production even more deeply if needed.
“[We are] meeting regularly, we are monitoring markets, and if we need to do more than the 1.2 [million barrels a day], we certainly will get together and do it,” he said.
US crude oil futures have rallied in recent weeks to trade above $51 per barrel. Brent crude, the global benchmark, is hovering around $60. Saudi Arabia would welcome further price hikes.
The country is relying on oil revenue to fund an economic overhaul and support growth. Its economy contracted in 2017, but was expected to grow 2.2% in 2018 and 2.4% this year, according to the International Monetary Fund.
Higher prices would also help clear the way for an initial public offering for state-owned Saudi oil company Aramco, part of the country’s plan to diversify its economy away from oil.
The IPO was initially planned for 2018 but later stalled. Al Falih said that a sale in 2021, however, is “very much doable.”
“We will do what’s right for the kingdom … what’s right for the new shareholders by making sure that the value is clear to the market and the market is ready to absorb such a large IPO,” he said.
Saudi Arabia recently opened up its vast energy reserves to independent auditors for the first time, a move that could build investor confidence ahead of a share sale.
US energy consultancy DeGolyer & MacNaughton has concluded that Saudi oil reserves total 268.5 billion barrels, the government said last week. The estimate is slightly higher than the 266.3 billion barrel figure previously published by the government.
A lack of transparency over the size of the country’s energy reserves had caused skepticism about the potential sale and the value of Aramco.