Oil prices fell to one…
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Saudi Oil Minister Ali al-Naimi says his country, which is already pumping oil at a near-record pace, is prepared to produce even more to satisfy what appears to be a rising demand in Asia, particularly China.
“Asian demand for oil remains strong, and we are ready to supply whatever is required,” al-Naimi, quoted by the Saudi Press Agency, said in a speech on April 27 in Beijing. “As the Asian population grows and as the middle class expands, so the demand for energy will increase. Oil will retain its preeminent position and Saudi Arabia will remain the number one supplier.”
Al-Naimi’s words are backed up by analysis issued by the energy news service Platts, which reported that Chinese demand for oil in March was 44.73 million metric tons, or 10.58 million barrels a day on average, 6.5 percent higher than in the same month in 2014.
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Still in Beijing the next day, al-Naimi repeated his message of increased demand for oil by Asia’s growing economies, but he added the caveat that “sudden rises or falls in the cost of oil are not welcome.”
Al-Naimi said such drops in oil prices, even when followed by small rallies, complicates the energy business in the long run, especially by stunting investments in the industry. “Oil is a long-term business, requiring long-term plans and investment,” he said.
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Nevertheless, it is al-Naimi who is seen as the driving force behind the persistence of oil’s low price. The average global price of oil peaked at over $110 per barrel in late June 2014, but began to fall primarily because of a boom in US shale oil production, which often requires relatively expensive hydraulic fracturing, or fracking.
At its November meeting in Vienna, OPEC had the opportunity to cut production and was urged to do so by some of its members, but under al-Naimi’s leadership, the cartel decided to maintain output at 30 million barrels a day. Later al-Naimi stated the strategy was to regain market share by keeping prices low long enough to make US shale production unprofitable.
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Saudi Arabia has adhered closely to al-Naimi’s plan. In March it produced a near-record 10.3 million barrels of oil per day, and the minister said output will probably stay at or near that level for some time, indicating, at least to some extent, that the Saudi strategy is working: It’s gradually restoring market share and making sure it has the supply to match demand.
“Saudi Arabia is a consistent, stable and reliable supplier of quality oil,” al-Naimi: “We are the most reliable supplier on earth. Quality and quantity is assured. We have proved over many years to be a reliable partner for China as its energy demands have increased. We remain committed to this partnership, and to this friendship.”
If al-Naimi’s words sound like a hard sell, they are. Saudi Arabia appears determined to go out and drum up more business rather than wait for customers to come calling. For example, last week he was in Seoul, doing his best to sell the South Koreans on the value – and quantity – of Saudi oil whenever they want it.
By Andy Tully of Oilprice.com
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Andy Tully is a veteran news reporter who is now the news editor for Oilprice.com