Saudi Arabia Expects Oil Price To Stabilize

Saudi Arabia's oil minister says he expects oil prices, which hit a near 6-year low in January, to stabilize, signaling cautious optimism about the market outlook.
Saudi Arabia's oil minister says he expects oil prices, which hit a near 6-year low in January, to stabilize, signaling cautious optimism about the market outlook.


BERLIN, March 4 (Reuters) - Saudi Arabia's oil minister said on Wednesday he expected oil prices, which hit a near six-year low in January, to stabilize, signalling cautious optimistism about the market outlook.

Giving a speech in the German capital, Ali al-Naimi also urged non-OPEC producers to help balance the oil market, saying it was not up to Saudi Arabia to subsidize higher-cost producers and that circumstances required non-OPEC to cooperate.

"Going forward, I hope and expect supply and demand to balance and for prices to stabilise," Naimi said. "Global economic growth seems more robust."

The comments are a further sign OPEC's top producer is sticking to its policy to defend market share. Last month, Naimi signalled satisfaction with developments, saying he saw oil demand growing and that markets were "calm".

Oil was trading just above $60 a barrel on Wednesday, up more than 30 percent from a near six-year low close to $45 on Jan. 13.

Prices collapsed from $115 in June due to oversupply, in a decline that deepened after Saudi Arabia and the rest of the Organization of the Petroleum Exporting Countries at a November meeting refused to cut output.

At the meeting, Saudi Arabia and its Gulf allies argued that the group needed to ride out lower prices in order to defend market share against higher-cost shale oil and other competing supply sources, rather than cut output.


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Philippe | Mar. 6, 2015
The crude oil price decline is the free thinking that crude oil abundance is incoherent with the longtime view of crude of future. We have had to deal with targeted industries bubbles: the “” the mortgages debacle comes to mind, although many more have taken places. What causes a bubble? It is the over enthusiasm that crude oil profits provided. The price of crude was artificial in that it was directly caused by the reduction of production. The price of crude dictated the level of investment required to stay competitive. Investment became billions of dollars, insanity was settling in. The price was artificially set by producing less crude. The bubble was in the making. OPEC took the position to act as a “Central Bank” the petroleum central bank. One of the ways a central bank exercise restraining guidance is by controlling the price of money. OPEC took the option to control the price by not changing the production level of crude oil. It has walked; the price has come down but has come back up to a reasonable level. What is the underlying reason the Saudis and friends, not OPEC as a whole, have to take the role of the “Petroleum central bank”? Everyone is talking about “market share” true but it is only part of the thinking. The world ecological green lobby is taking stream. The green lobby is out to kill crude oil first and natural gas second. The Keystone pipeline is one example. The Saudis understood that higher the price of crude will be, easier it will be of the green lobby to make alternative energy competitive. We are at the beginning of a new crude oil price management, and the Saudis are the best places to act as the petroleum central bank. Getting the crude oil index price at $140 per BBL will kill the goose. The new management will keep the price as low as necessary to compete with the green energy. Rather than cutting production to increase prices, production will increase to keep the price competitive and as is. The challenges are quiet obvious, several producers will be hurt: Venezuela, Russia, Iran, Nigeria, and many more. Many projects are too expensive to be implemented. This is the new O&G business model.


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