Saudi Arabia is prepared to increase its oil output and claim a bigger market share to meet the demands of any new customers, yesterday’s edition of the Saudi-owned al-Hayat newspaper quoted the kingdom’s Oil Minister as saying.
Asked if Saudi Arabia wanted to maintain a market share of 9.7 million barrels per day, Ali al-Naimi told the newspaper: “Yes, unless a new client comes along and then we may increase it.”
The remark was one of the strongest signals yet that the world’s top oil exporter has no intention of cutting output in the face of sliding oil prices, and is instead willing to use its low cost of production to win market share from non-Opec competitors which it blames for the price collapse.
At an Arab oil producers’ conference in Abu Dhabi on Sunday, Naimi said Saudi Arabia would not cut output to prop up oil markets even if non-Opec nations did so, and that the best way to address conditions in the oil market was to “let the most efficient producers produce”.
In the interview published yesterday, Naimi said: “Based on the analysis we have done, we will not cut output at Opec.”
He also denied media reports that he had debated oil policy with his Russian counterpart Alexander Novak at a meeting on the sidelines of the late November Opec conference in Vienna.
He recalled that the head of Russian state oil firm Rosneft Igor Sechin had spoken for 30 minutes on the oil industry in his country and concluded by saying: “We cannot cut anything because our wells are old and if we reduced their output they will not produce again.”
Naimi said he ended the meeting when Novak confirmed that his country was not willing to cut output. “I did not ask him any question and I don’t know who reported this talk,” al-Hayat quoted Naimi as saying.
The minister also dismissed the idea that lower oil prices could result in a Saudi budget deficit this year, saying the kingdom currently had no debt and was ready to borrow if necessary.
“The banks are loaded and we can borrow from them while maintaining cash reserves,” he said.
Asked if Gulf Arab oil producers were in a position to put up with the lower oil prices for two or three years if necessary, he said they could.
Oil rose above $62 a barrel yesterday, mirroring gains in equities, as investors became confident there would be no further substantial price loss in the run-up to the new year.
“Naimi said that the market would correct itself and was confident that the fall was temporary,” Michael Hewson, chief market strategist at CMC Markets, said.
“The market has calmed down and it is forming a short-term base above $60, and it’s to be expected that there would be a bit of a rebound after such a sharp fall.”
Brent rose 74 cents to $62.12 by 0854 GMT. It is down 46 per cent from the year’s peak in June above $115 per barrel. US crude was up 66 cents at $57.79 a barrel.
While analysts said Brent would likely remain over $60 a barrel for the rest of the year, they said further large jumps in price were unlikely.
“Any oil relief rally is likely to be limited and short-lived, barring a major outage. We see too many headwinds that must be addressed,” Morgan Stanley said yesterday in a report.
National Australia Bank said: “Given the lead time in permit approval and rig construction ahead of oil production, a sizeable negative US supply response given the price drop is unlikely to take place until late 2015, which places further downward pressure on oil prices in the first six months of next year.”
The bank added that it expected Brent and US crude to average $68 and $64 per barrel respectively in 2015.
Analysts also said they expected relatively low price volatility for the rest of the year as traders begin to wind down their 2014 positions.