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Page added on December 20, 2014
Saudi Oil Minister Naimi says oil price drop temporary
Saudi Arabia’s powerful oil minister said on Thursday that OPEC could not cut output without the support of other big producers and attempts to get them on board had not worked.
Ali al-Naimi said it was impossible for OPEC to cut alone to reverse the oil price slump — which he called temporary — when others were pumping more, saying that could lead to losing market share and with no guarantee of supporting prices.
Officials and executives from non-OPEC Russia and Mexico travelled to Vienna last month ahead of OPEC’s meeting, with some in the group hoping they would cooperate in output cuts.
Naimi has stayed tightlipped, saying only he had no expectations after meeting them in a Vienna hotel, and that he had not initiated it. OPEC decided not to cut at its meeting.
On Thursday, Naimi told Saudi state news agency SPA that OPEC sought last month, as on past occasions, cooperation from other non-OPEC oil producers but “those efforts were not successful.”
Russia has said it would not cut production even if oil prices fell below $60 per barrel – far below some $100 a barrel it needs to balance its budget.
Brent edged up slightly to near $63 a barrel on Thursday – but was still over 40 percent down from this year’s peaks in June.
“OPEC’s quota as well as Saudi Arabia’s in the global oil market has not changed for several years, which is at the level of 30 million barrels per day for OPEC, out of that around 9.6 million bpd is the kingdom’s, while the production of others from outside OPEC is continuously rising,” Naimi told SPA.
“In a situation like this, it is difficult, if not impossible, for the kingdom or for OPEC to take any action that would reduce its market share and increase the shares of others, at a time when it is difficult to control prices,” he said.
“We would lose on both market share and price.”
Before the Vienna meeting last month, there were hints that Russia could cut output or exports if OPEC did the same.
But the message from Moscow after the meeting was that the world’s second largest oil exporter, after Saudi Arabia, will maintain its output levels even if there was no guarantee prices would not go much lower.
Moscow’s relations with OPEC were soured by its pledge to cut output in tandem with the group in the early 2000s. Russia failed to follow through, and raised exports instead.
PRICE SLIDE ‘TEMPORARY’
Naimi also reiterated his rejection of any linking of the kingdom’s oil policy with political motives.
“There are wrong information and analyses that are circulated from time to time, like linking oil decisions with political motives. These wrong analyses will be exposed for sure, which would help to bring back balance to the market,” he said.
The shift in Saudi policy to leaving the market to stabilise itself has unleashed a flurry of conspiracy theories, ranging from the Saudis seeking to curtail the U.S. oil boom, to Riyadh looking to undermine Iran and Russia due to their support of Saudi’s arch-enemy, Syrian President Bashar al-Assad.
Naimi said the fall in oil prices was temporary.
“I am optimistic about the future. What we are facing now and what the world is facing is a temporary situation and will pass,” he told SPA.
“The global economy, especially the emerging economies will return to sustainable growth, and therefore the demand for oil will also grow,” he said.
He also warned against the “negative role of speculators” in the oil market, causing the sharp price volatility. He said the kingdom had a strong economy and huge financial reserves that make it able to weather the oil price volatility.
12 Comments on "Saudi Oil Minister Naimi says oil price drop temporary"
Davy on Sat, 20th Dec 2014 6:12 am
KSA forward guidance is much like the feds as consumption for MSM and the GP. It is intended to maintain calm and restore stability. They are using the pseudo-science view found in economics that the market will find a price level and return to a stability. What KSA will not admit or does not believe is the case of a bumpy descent of the economy and oil depletion part playing out in this condition. Oil depletion is now the driver in the oil price environment. Sure the market price has multiple influences and will gyrate.
I imagine with the turbulence and instabilities in the economy and the oil sector these coming gyrations are going to be disruptive and dangerous. Nothing is more dangerous and disruptive then volatility that is unless you are a speculator. This is especially true in today’s environment of corruption, manipulation, and disregard to normal traditional rules of law.
We are going to see a longer term trend down in conjunction and codependence with the economy that is also gyrating and stagnating from debt. The bumpy descent is the end game. Man no longer has substitution and transition with complexity and energy sources. We have hit peak complexity, peak energy intensity, and peak consumption. It is downhill from here and all this jawboning is denial and delusion and or lies and manipulations. We are at a time of a decaying human system. We should expect wildly delusional jawboning from MSM and TPTB. It is Baghdad Bob at the level of the UN. What could be more surreal?
bobinget on Sat, 20th Dec 2014 7:17 am
If posters would adopt a more positive approach
we might increase on-line readership.
Rather then harping on admittedly, bleak prospects, we should, in manners of the ‘old internet,’ trade useful information.
We here need to decide wether it’s more useful
to sow seeds of depression and denial or
seek truth, tell it like it is without using fancy
language.
Did Davy actually read the following sentence before hitting ‘send’?
“Man no longer has substitution and transition with complexity and energy sources”
What on earth does that mean?
On topic: clearly, Naimi blinked. Not to put too fine a point on it but KSA’s campaign of market manipulation, PR, using KSA oil as a weapon,
failed.
IOW’s Saudis are under tremendous pressure to close out short positions permitting *real market forces* to function.
*Where dozens of super computers trade a single equity or futures contract a billion times a second.
For ‘poor’ Saudi Arabia, may already be too late. By perpetrating this so called ‘correction’, the Royals cooked their own geese. Trillions in financing fled markets may already invested elsewhere.
OPEC, at least OPEC in it’s current configuration is a dead letter.
Whenever news this important shows up on Friday we should know those who released it were less then proud of it.
Nony on Sat, 20th Dec 2014 7:49 am
Let us drill the ANWAR, open the GOM, open the other coasts, permit the KXL and other pipelines. We can really rock this pig. The USA can do it.
I remember calling a repeat of the 1980s (with US as a key producer) back in mid 2000s. And everyone though I was crazy.
But I was right and doomers were wrong, wrong, wrong, wrong. TOD is dead.
antaris on Sat, 20th Dec 2014 8:10 am
Nony = Idiot
shortonoil on Sat, 20th Dec 2014 10:00 am
Naimi said the fall in oil prices was temporary.
Most likely the recent huge decline we have seen is temporary. Our projections put the 2015 WTI oil price at $76/barrel:
http://www.thehillsgroup.org/depletion2_022.htm
The swings we are now seeing in prices is a function of the volatility that is growing in the market. The variance in prices between 2005 and 2013 is 412% greater than the variance in the prices between 1960 and 2004. The price of oil is becoming increasing unstable.
This increased volatility began when conventional crude peaked in 2005, and has increased as lower quality crudes began to enter the market as substitutes. Lower quality crudes have lower per unit energy delivery capabilities. The petroleum market is primarily long term driven by inventory levels, and this has not taken into consideration the decreasing economic impact of a lower quality crude. A lower quality crude is very poor at promoting the increasing economic activity needed to increase the demand for petroleum. That is, the energy delivered from petroleum drives its own demand. Swings in prices appear when inventory levels increase, but compensatory increases in economic activity don’t follow.
The energy producers will most likely see some relief this coming year from the the present very low prices. However, the days of $100/barrel oil are gone forever; depletion of the world’s petroleum reserves ensures that conclusion.
http://www.thehillsgroup.org/
Apneaman on Sat, 20th Dec 2014 10:31 am
Nony, do you realize that you have regressed to nonsensical babbling and shouting?
Kenz300 on Sat, 20th Dec 2014 10:48 am
The drop in oil prices gives the world economy a big boost for growth…….
Consumers should rejoice…… and enjoy it while it lasts. World GDP will be higher……Demand will grow……
Producers will take a hit….Iran, Russia and OPEC will loose….. shale, tar sands and deep water investments will slow……..depletion continues….. supply growth will slow.
Supply and demand will come back into balance.
Bloomer on Sat, 20th Dec 2014 11:29 am
Remember the 90’s? Lower oil prices, lower unemployment, governments with balance budgets, far lower consumer debt. While I don’t believe crude prices will stay this low for too long, its’ a nice reprieve not pumping hard earn dollars into the gas tank.
GregT on Sat, 20th Dec 2014 1:37 pm
““The global economy, especially the emerging economies will return to sustainable growth, and therefore the demand for oil will also grow,” he said.”
As long as we continue to listen to idiotic statements like the one above, the deeper the hole will become that we are digging ourselves into. Sustainable growth is an oxymoron. People who believe otherwise, are simply morons.
shortonoil on Sat, 20th Dec 2014 6:07 pm
As long as we continue to listen to idiotic statements like the one above, the deeper the hole will become that we are digging ourselves into.
I seriously doubt that the Saudi Oil Minister believes what he has spoken. The Saudis are now trying to protect their oil market, as it is about the only thing that they produce other than sand. The world has been asking OPEC to cut its production to save the world’s other high cost producers. The Saudis know that that this would be an exercise in futility because as next year rolls around they would just be back asking for another handout. It is no wonder that Russia, nor anyone else has agreed to such a ridiculous suggestion.
Russia, and OPEC are merely working in their own best interests, and they know that the most economical route for them to take is to just let prices fall until the dead wood has been cleared out. Naimi is saying in a diplomatic fashion, “if you want to run a bunch of worthless wells in some North Dakota cow pasture that is your business, Just don’t ask us to pay for it.”
Can’t say I blame him.
Kenz300 on Mon, 22nd Dec 2014 7:18 pm
Shale, tar sands and deep water are the high cost producers……..
Those investments are already pulling back….
How long before the quickly depleting shale plays decline in overall production without drilling many new wells…………
All the while depletion continues at the worlds biggest producers…. while new investment dollars dry up.
The world needs to diversify its energy sources and types. The sooner we transition to alternative energy sources the better it will be for the economy and for the planet.
Alternative energy may be a safer and more reliable investment.
Nony on Mon, 22nd Dec 2014 8:10 pm
Open up ANWAR and more offshore. NEed more places to drill if the shales dry up.