Saudi oil minister says market should handle low prices

The crowd wasn’t entirely amiable.

Keeping output at record levels also does not help stabilize oil prices, Currie added. Tens of thousands of workers have lost their jobs, and bankruptcy filings are rising across the oil patch. 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.

On accusations to the contrary, often in the media, Saudi Arabia, is “not chasing a greater market share”, he stressed. We tried hard to bring everyone together – OPEC and non-OPEC – to seek consensus.

The turnabout lower in oil prices Tuesday has had negative spillover effects for other instruments, with U.S. stock prices falling and U.S. Treasuries back in hot demand. US production has fallen in recent months as companies canceled projects and capped existing wells.

“It sound harsh, and unfortunately it is, but it is the most efficient way to rebalance markets”, Naimi told the audience in Houston on Tuesday.

For some USA oil industry leaders, Al-Naimi’s collaborative message seemed like a tacit recognition of the shale sector’s staying power.

Going forward, a larger “rally in oil prices, triggered by the supply side, could have a positive effect on energy and bank stocks”, Jen said. “I think, from the minister’s comments, that [OPEC has] come to that realization”. If U.S. crude futures drop below $31.30 a barrel, there may another downward leg, said Zahir, adding that crude stockpiles are expected to build as refineries shut for spring maintenance.

America’s oil output has roughly doubled since 2008, peaking at 9.7 million barrels a day in April 2015 – its highest level since 1971. It last traded at US$1.3876, down 1% on the day, and at 78.91 pence per euro.

“At the moment all signs still suggest that supply is continuing to strongly outstrip demand”, said Dominick Chirichella, analyst at the Energy Management Institute, in a note.

Oil has slumped more than 50 percent since Saudi Arabia led OPEC’s decision in November 2014 to maintain output and defend market share against higher-cost US shale producers. Many had started to view the move as the beginning of the long-wished production cut. The prior week saw an increase in stockpiles of 2.15 million barrels.

Just a day earlier, oil prices surged after the International Energy Agency predicted that oil supply and demand would balance next year because of a steep drop in new drilling, namely in the U.S. The group’s executive director, Fatih Birol, predicted that crude would more than double to $80 a barrel by 2020.

Al Naimi, speaking as part of a panel discussion at the IHS Energy CERAWeek conference taking place February 22-26 in Houston, Texas, said there was “no sense in wasting time” with production cuts, given the the lack of trust among producers.

After Iran’s remark, Saudi Arabia also scrapped the option of output cuts by major producers in the near term. Al-Naimi and his counterparts in Venezuela, Qatar and non-OPEC member Russian Federation agreed last week to such a deal on the condition that Iran, Iraq and other big oil exporters agree to a production freeze.