Saudi Oil minister: No point in talking about production cuts

Saudi oil minister Ali Al-Naimi said on Tuesday that any talks about the cutting of oil production are a waste of time, as there is no mutual trust, or there is less trust than before among the oil producers.

He was a speaker at the annual energy conference IHS Ceraweek in Houston, and he started his speech with something along the lines of “you only invite me in a crisis”, much to the laughter in the audience of the packed Ballroom hall of the Hilton Americas Hotel in Houston, where the five-day event is being held.

Keeping the audience well entertained at the beginning of his speech, Al-Naimi said: “I joined Aramco as an office boy in 1947. During my seven decades in the industry, I’ve seen oil at under $2 a barrel and at $147, and much volatility in between. I’ve witnessed gluts and scarcity. I’ve seen multiple booms and busts.  I’ve even survived peak oil. I think I have a t-shirt somewhere with that on it.

“These experiences have taught me that this business, and this commodity, like all commodities, is inevitably cyclical. Demand rises and falls. Supply rises and falls. Prices rise and fall.”

No war on shale

He reiterated that Opec has not declared a war on U.S. shale, or production from any other producing company or  a country, and he also dismissed the media writings claiming that OPEC is after a greater market share, but said “our purpose is to satisfy our customers’ demand”.

He also said Saudi Arabia was working on shale exploration itself, but said it was merely a homework for the future with no plans to start producing any time soon, as there is enough conventional oil in Saudi Arabia.

The Freeze

When it comes to oil production and the much talked about „freeze“ of oil output agreed by Saudi Arabia, Venezuela, Russia and Qatar last week, Al-Aimi was more open to share a word or two on the topic, unlike the Secretary General of Opec El-Badri on Monday.

IHS Ceraweek Chairman Daniel Yergin asked Al-Naimi to paint some color on the „freeze“, its concept, what it is, what it isn’t.

Al-Naimi said the freeze was a start of a process, where, if all big producers agree not to add more barrels, high inventory will decline and the market will eventually rebalance.

He said that a meeting on the matter will be held in March, hoping to agree on the implementation of the freeze, and wishing more major producers to agree to the accord.

But he highlighted that there would be no talk of production curbs.

“It is not like cutting production. That is not going to happen because not many countries are going to deliver even if they say they will cut production, they will not deliver. So there is no sense in wasting our time seeking production cuts,” he said.

Viva Las Vegas?

Asked about the oil prices forecast by Daniel Yergin, Al-Naimi said: “If I knew that, you and I would go to Las Vegas.”

On a more serious note, he said that while supply and demand obviously dictate the oil prices, the prices go up and down a lot because of speculation.

“Why did the prices go up yesterday? Because the IEA said something…”, said Al-Aimi, referring to the mid-term report by the IEA issued on Monday, predicting the oil prices to hit $80 a barrel figure by 2020.

He also said that speculations affect the market short-term, and not long term, but “short term is here to stay”.

“This business is cyclical. We are in a painful downturn, but the market will rebalance and demand will pick up. I remain optimistic. We must continue to work together and we must stick together if we want to achieve our common goal of supplying energy for the betterment of the world and humankind,” Al-Naimi said.

By Bartolomej Tomić, Senior Editor, Offshore Energy Today

Offshore Energy Today Staff