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Page added on January 19, 2015
Former Saudi oil boss says it can cope with low price
Saudi Arabia can cope with low oil prices for “at least eight years”, Saudi Arabia’s minister of petroleum’s former senior adviser has told the BBC.
Mohammed al-Sabban said the country’s policy was to defend its current market share by enduring low prices.
“You need to allow prices to go as low as possible in order to see those marginal producers move out of the market,” he said.
Mr al-Sabban advised the ministry for 27 years, leaving last year.
Saudi Arabia, the largest producer within the Opec oil producers’ cartel, has repeatedly said that it will not cut output to try to boost the oil price.
Mr al-Sabban said Saudi Arabia’s “huge financial reserves” would enable it to cope with the low oil price.
The country is now in the process of cutting government spending.
Without these cuts, Mr al-Sabban said, Saudi Arabia could not cope with low oil prices for more than four years.
Falling further
Oil prices have more than halved since June.
The dramatic fall has been blamed on a sharp increase in production from North American shale companies, which has increased the supply of oil and gas, helping to depress prices.
Also undermining the price of oil are slowing global economic demand and a rising dollar against a range of other currencies.
The latter can flatter the oil price, which nonetheless can remain the same price in a local currency that buys fewer dollars.
On Monday, Brent crude was trading at around $49.40 a barrel, down 77 cents, and US crude was trading down 74 cents at $47.95 a barrel.
The falls came after Saudi Arabia said again on Sunday that it would not cut output to prop up oil markets.
Referring to countries outside of Opec, Saudi oil minister Ali al-Naimi said: “If they want to cut production they are welcome. We are not going to cut, certainly Saudi Arabia is not going to cut.”
8 Comments on "Former Saudi oil boss says it can cope with low price"
Plantagenet on Mon, 19th Jan 2015 12:36 pm
I’ll be really impressed if the Saudis can pump enough oil to ke the price low for eight years
bobinget on Mon, 19th Jan 2015 1:16 pm
How about 9.8 MB p/d for eight (more) months?
Let me put it as plainly as possible.
Saudi Arabia is like Poland in 1939.
Enemies from within and without.
If KSA survives in its present form till Xmas 2015
it will be amazing.
Anyone seen the news out of Yemen?
Yemen’s powerful Houthi movement fought artillery battles with the army near the presidential palace in Sanaa on Monday, plunging the fragile Arab state deeper into turmoil and drawing accusations that the militia fighters were mounting a coup.
Explosions echoed across the city and plumes of dark smoke hung over downtown buildings as the most intense clashes since the Shi’ite Muslim Houthi movement seized the capital in September brought everyday life to a halt.
The Houthis had seized the state news agency and television station, a government minister said.
Plantagenet on Mon, 19th Jan 2015 2:46 pm
The obama administration has backed the government in Yemen for years with money, military aid and drone attacks on various militias and terror groups based there. Saudi Arabia is also unlikely to want to see a Shia militia take over Yemen.
This could get interesting.
nemteck on Mon, 19th Jan 2015 3:49 pm
“Saudi Arabia can cope with low oil prices for “at least eight years”. Without being racist, we all know what the truth content of a phrase is uttered by an Arab.
Let the oil price received by SA before June 2014 to be #100 and the received price now be $50. Let the SA export be 7 Mb/d. Hence, SA receives $350 Million less per day. Assume export on 350 days per year will generate a decrease in income of $123 Billion per year.
How long can SA sustain this? Not long before the population gets restless since “The country is now in the process of cutting government spending” where youth unemployment is already high and social spending is high to keep civil obedience.
J-Gav on Mon, 19th Jan 2015 3:58 pm
Nem – “… we all know what the truth content of a phrase is, uttered by an Arab.”
Not saying you’re wrong, just that if you ask the same question as regards Western politicians, the answer is not much different.
bobinget on Mon, 19th Jan 2015 4:22 pm
Mr al-Sabban was just showing loyalty. What would
you expect him to say? These times, eight days can change the world forever.
How long can KSA, in the mist of all this tribal intrigue, power politics, survive?
I believe I first asked that question, on line, nine years ago.
Money may not buy happiness but it does root out spies, internal enemies before they knew they were enemies.
Perk Earl on Tue, 20th Jan 2015 2:52 am
Talk about mixed messages. At one time we heard SA needed a 100 dollars a barrel to meet their budgets. Now it can be much lower for 8 years? Uh, hello!
westexas on Tue, 20th Jan 2015 9:02 am
I estimate that Saudi Arabia has already shipped, through 2013, about 40% of their post-2005 CNE (Cumulative Net Exports).
In any case, by definition it’s not whether, but to what degree, that Saudi Arabia has depleted their post-2005 supply of CNE.
In addition, it’s very likely that the annual rate of depletion in remaining post-2005 Saudi CNE accelerated from 2006 to 2013, i.e., they are in the process of consuming their remaining supply of CNE at an accelerating rate of depletion.