The OPEC+ press conference that took place on Monday was an exercise in “Zoom communications” that deserves closer analysis.
Because of global travel restrictions, the conference was held virtually in place of a traditional media gathering, in which the main players face the press and explain the decisions taken behind closed doors.
As such, much of the event consisted of a reiteration of the rationale behind the policy decisions taken at the weekend meeting. As an OPEC+ event, it was hosted by ministers from the two leading players within that alliance — Saudi Energy Minister Prince Abdul Aziz bin Salman and his Russian counterpart Alexander Novak — backed by the OPEC apparatus.
The central messages from the agreement were hammered home in the course of the hour-long Q&A session: The historic cuts agreed upon in April would be extended for another month; a rigorous emphasis would be placed on getting OPEC+ partners (Mexico was quietly ignored) to comply with the 9.6 million-barrel target; and the OPEC+ supervisory machinery, in the form of the Joint Ministerial Monitoring Committee (JMCC), would be eagle-eyed in looking for backsliding.
It was perhaps when the participants went off script that the most interesting nuances emerged. Novak, for example, said that the aim of the OPEC+ policy was to “find an equilibrium spot and stabilize around it,” which some observers took to mean a desire to get prices around the $43 per barrel level Russia’s economic planning dictates.
But there is little doubt that the Saudi minister stole the show with a series of off-piste remarks that showed how the Kingdom is thinking just a few weeks on from the biggest crisis ever to hit the oil industry.
There was the heartfelt plea at the end of the meeting to the 100 or so journalists for a bit of balance in their reporting of the oil business. “Give us the benefit of the doubt. I respect your right to report what you think is right, but it’s not the only story in town,” the prince said. How that will work out remains to be seen.
There was also the candid aside, “We are not diplomats, we are oilmen,” in response to a question about how OPEC+ would enforce commitments to full compliance. The Saudi minister obviously expects OPEC+ to stick by the letter of the April agreement, regardless of special pleas or circumstances, even at the risk of ruffling feathers in the partnership.
But perhaps the clearest sign of how OPEC+ will run things in the future came when Prince Abdul Aziz suggested he wanted to learn from the central bankers how to run an industry in stressful times. “The central bankers did a great job in 2008, and are doing the same even now,” he said, adding that Alan Greenspan, long-time chairman of the US Federal Reserve, was his “hero.”
It is unlikely he was referring to the quantitative easing, fiscal stimulus, junk bond buying programs, or any of the other techniques central banks around the world have used to cope with the effects of the pandemic crisis.
Rather, it seems he was referring to the way central banks have coordinated financial and economic policies on at least a monthly basis. The JMMC supervision will probably take on the flavor of the Federal Reserve or Bank of England monthly reports, which set the tone for their governments’ crisis management policies via painstaking and detailed analysis of economic data.
There is a good deal to be said for this approach. One criticism of OPEC+ agreements in the past has been that, after the big figure deal on production limits, there was little attention given as to how those agreements would be implemented and overseen.
The “central bank” reference was a clear indication that Saudi Arabia wants OPEC+ to adopt a more rigorous regime for compliance and enforcement. As one commentator said after the OPEC+ press webinar: “There’s a new sheriff in town.”