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“We have to be vigilant, we have to be proactive - as we in OPEC+ has been saying for quite some time,” said Prince Abdulaziz. Image Credit: Bloomberg

Riyadh: Saudi Arabia’s top energy official issued another warning to oil short-sellers, just over a week before the OPEC+ alliance is due to meet.

Riyadh and its partners surprised crude traders last month by announcing output cutbacks intended to scare off speculators. But money managers have turned bearish again in recent weeks amid fears of a weaker global economy.

“I keep advising them that they will be ouching - they did ouch in April,” Saudi Energy Minister Prince Abdulaziz bin Salman said at a forum in Doha on Tuesday. “I would just tell them: Watch out!”

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Oil prices have fluctuated around $75 a barrel in London this month as traders weigh a positive outlook for demand against faltering economic data from China, risks of recession in the US and a protracted battle over America’s debt ceiling.

The Organization of Petroleum Exporting Countries and its allies, a 23-nation bloc known as OPEC+, will meet on June 3-4 in Vienna to review production policy for the second-half of the year.

While several delegates have said there’s no need for further action now as curbs already in place will help tighten global markets, Prince Abdulaziz has been known for orchestrating surprise interventions.

“We have to be vigilant, we have to be proactive - as we in OPEC+ has been saying for quite some time,” he said.

In theory, global oil inventories are on track to tighten sharply for the remainder of the year as China’s post-pandemic rebound in fuel consumption gathers pace, with OPEC’s own data pointing to a substantial supply shortfall of about 1.5 million barrels a day.

The latest market data show that short-sellers, who initially fled after the shock OPEC+ cutbacks were unveiled in early April, are making a comeback. Funds have turned the most bearish in more than a decade across a slew of oil contracts.

“Current speculative positioning is so extreme as to make a response from key OPEC members likely,” analysts Paul Horsnell and Emily Ashford at Standard Chartered Bank said in a report on Monday. “We think the latest data has increased momentum toward a defensive cut.”

The prince said OPEC’s actions show it’s a stabilizing force rather than being engaged in price gouging. He blamed market volatility on erroneous forecasts and policies among consuming nations “- such as the release of emergency stockpiles by the US.

Iraqi Oil Minister Hayyan Abdul Ghani, speaking at the same panel session in Qatar, said that Baghdad was committed to OPEC’s latest agreement to reduce supplies. The country aims to boost investments in natural gas and reduce flaring of the fuel, he added.