Share

Saudi sees oil market stabilising itself'

Vienna - Opec leader Saudi Arabia signalled on Wednesday it was unlikely to push for a major change in oil output at the producer group's meeting this week, a day after Russia refused to cooperate in any production cut and threatened to unleash an oil price war.

Saudi Oil Minister Ali al-Naimi said he expected the oil market "to stabilise itself eventually" but did not comment on four-country talks with Russia held on Tuesday.

Opec's meeting on Thursday will be one of the most crucial in recent years, with oil prices having tumbled some 30% since June to below $79 per barrel due to booming US shale oil output and slower global economic growth.

Opec usually faces huge tensions from within but as talks over Iran's nuclear programme ended with no breakthrough on Monday, most members felt relief they will not have to deal with a deluge of Iranian oil, currently hit by Western sanctions.

Non-Opec member Russia, which produces 10.5 million barrels per day (bpd) or 11% of global oil, came to Tuesday's meeting amid hints it might agree to cut output as it is suffering from oil's price fall and Western sanctions over Ukraine.

But as the meeting with Naimi and officials from Venezuela and non-Opec member Mexico ended on Tuesday, Russia's most influential oil official, state firm Rosneft's head Igor Sechin, emerged with a surprise message - Russia will not reduce output even if oil falls to $60 per barrel.

He added that he expected low oil prices to do more damage to producing nations with higher costs, in a clear reference to the shale oil boom in the United States.

Sechin's suggestion that Russia - in desperate need of oil prices above $100 per barrel to balance its budget - was ready for an oil price war took many at Opec by surprise.

"Gulf states are less bothered about a price drop compared to other Opec members," an Opec source close to Gulf thinking said, adding that non-Opec members ultimately needed to cut output if they expected the group to defend prices.

Opec produces 30 million bpd, or a third of global oil. Its own publications have shown in recent months that global supply will exceed demand by over 1 million bpd in the first half of next year.

While the statistics speak in favour of a cut, the build-up to the Opec meeting on Thursday has seen one of the most heated debates in years about the next policy step for the group.

While price hawks such as Venezuela have urged an immediate output cut to support prices, some Saudi officials told private briefings in recent months that the kingdom was prepared to withstand low oil prices - possibly $70 per barrel - for a prolonged period.

Those messages have sparked conspiracy theories ranging from Saudis seeking to curtail the U.S. oil boom, which needs high prices to remain profitable, to Riyadh looking to undermine Iran and Russia due to their support of Saudi's arch-enemy, Syrian President Bashar al-Assad.

"I think even Saudi Arabia doesn't know yet whether a cut can be achieved," said Virendra Chauhan, an analyst at the Energy Aspects think tank.

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.94
-0.0%
Rand - Pound
23.90
-0.0%
Rand - Euro
20.41
+0.1%
Rand - Aus dollar
12.32
+0.1%
Rand - Yen
0.13
-0.0%
Platinum
908.05
+1.2%
Palladium
1,014.94
+1.3%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders