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Saudi Arabia’s oil production was up to 10.3 million barrels in March, and an senior Saudi energy official says that will meet an annual global rise in demand of as much as 1 million barrels a day.
In fact, total yearly demand around the world is expected to reach 105 million barrels a day by 2025, Ibrahim al-Muhanna told an energy conference in Riyadh on April 10.
Al-Muhanna, an adviser to Saudi Oil Minister Ali al-Naimi, said the current depression in both oil prices and demand is a “temporary, unnatural situation,” and that in the foreseeable future there will be “continued growth in demand for the various types of energy, including oil.”
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“At a minimum,” al-Muhanna said, “oil demand is expected to grow annually by up to 1 million barrels per day and world consumption is expected to increase to about 105 million barrels per day in 2025, even when taking into consideration all the energy rationalization policies in countries all over the globe.”
Whether al-Muhanna’s forecast is accurate or not, he may have a point. There was a drop in demand over the past several months in both Asia and Europe, but Asian consumption as begun to rise again, and Saudi Arabia cut prices for its oil destined for the region in March.
This is part of the kingdom’s effort to regain market share lost during the worst of the oil glut, as oil from Africa, Latin America and Russia is also being offered to China, which followed only the United States as the world’s largest consumer of oil last year, according to the International Energy Agency.
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Further, Iran has sought to allay fears that its expected full-scale return to the global oil market may worsen the glut and push down prices even further if its tentative nuclear deal with six world powers becomes final. Iranian Oil Minister Bijan Zanganeh told Reuters during a visit to Beijing that Tehran would “coordinate itself” to ensure there will be no further drop in prices.
The forecast by al-Muhanna in a way quantifies points made by al-Naimi himself in Riyadh on April 7, when he disclosed that the kingdom’s output of 10.3 million barrels a day in March, the most since 2002. Al-Naimi said his country will keep producing at a rate of about 10 million barrels a day because he expects oil prices will rise soon. Related: Top 12 Media Myths On Oil Prices
In the meantime, though, al-Naimi said Saudi Arabia and OPEC as a whole will not cut production without the cooperation of those who aren’t members of the cartel. They include the United States, which is expected in 2015 to produce the most crude it has since it did in 1972, and Russia, which he said is producing oil at near-record highs since the breakup of the Soviet Union.
“Prices will improve in the near future,” al-Naimi said. “The challenge is to restore the supply-demand balance and reach price stability. This requires the cooperation of non-OPEC major producers.”
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