Naimi Says Saudi Oil Strategy Working, Sees Stronger Demand


VIENNA, June 1 (Reuters) - Saudi Arabia's oil minister Ali al-Naimi said on Monday he expects oil demand to pick up in the second half of 2015 while supply decreases, in a sign that the kingdom's strategy of defending market share was working.

The comment indicates Saudi Arabia will likely propose not to change output policy at producer group OPEC's meeting on Friday, although Naimi declined to speak directly on the issue.

"The answer is yes," Naimi said in his first public comment upon arrival in Vienna, where the meeting will take place, when asked whether the strategy of defending market share through higher supplies and lower oil prices was working.

"Demand is picking up. Good! Supply is slowing, right? That is a fact," he told reporters. "You can see that I'm not stressed, I'm happy," he said.

Naimi was the key architect of OPEC's decision at its last meeting in November 2014 not to cut crude production despite a growing global glut, exacerbated by a boom in U.S. shale oil.

Instead, OPEC kingpin Saudi Arabia raised production to win back market share and depress the output of higher-cost producers through lower oil prices, which fell from as much as $115 in June 2014 to as low as $46 in January 2015.

However, prices have recovered in recent weeks to $60-$65 per barrel on the possibility of a major slowdown in U.S. oil output and signs of stronger global demand.

Naimi said it would take time for the oil markets - still heavily oversupplied - to rebalance. "I don't have a crystal ball but it is (going) in the right direction," he said.

He added he was not concerned by prospects of an increase in Iraqi or Iranian supplies later in the year.

He said he doubted that millions of barrels of oil stored in recent months by traders and oil companies would be offered anew in the market, thus leading to a fresh drop in prices.

He said one reason why that would not happen was the narrowing contango - a market structure in which future prices are higher than current prices, encouraging the storage of oil for resale at a profit in the future. The opposite structure, backwardation, has current prices higher than future prices.

"This is not a good time to sell the surplus. So they (traders) have to keep it and as the contango goes down and they see the backwardation coming forward they will hang on to it. They are not going to dump it on the market," Naimi said.

(Additional reporting by Reem Shamseddine, writing by Dmitry Zhdannikov, editing by Dale Hudson)

Copyright 2017 Thomson Reuters. Click for Restrictions.


Click on the button below to add a comment.
Post a Comment
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
Arbin0072002 | Jun. 2, 2015
Get use to the new oil price as being lower and adjustments being made to thing the Saudis have that the US doesnt have and thats cheap labor...time to bring in the Mexicans to balance the playing field!!!


Our Privacy Pledge

Most Popular Articles

From the Career Center
Jobs that may interest you
Production Analyst
Expertise: Accounting|Financial Analyst
Location: Midland, TX
Provisioning/Supply Analyst
Expertise: Inventory Control|Purchasing
Location: Hanover, MD
Executive Protection Coordinator
Expertise: Risk Management|Security
Location: TX
search for more jobs

Brent Crude Oil : $50.56/BBL 0.15%
Light Crude Oil : $47.7/BBL 0.70%
Natural Gas : $3.05/MMBtu 1.32%
Updated in last 24 hours