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Who Gets Hold Of Russia’s Key Oil Hub?

Who Gets Hold Of Russia’s Key Oil Hub?

25 percent of the Novorossiysk…

Saudis Concerned About Tighter Spare Oil Production Capacity

Oil storage

Although the oil market is now in better shape than it was in 2016, there are concerns about the tight spare oil production capacity, Saudi Arabia’s Energy Minister Khalid al-Falih told Reuters on Monday.

“We are concerned about tight spare capacity nowadays,” al-Falih told Reuters after meeting with the Japanese trade minister in Tokyo, adding that OPEC and its non-OPEC partners in the production cut deal would discuss the spare production capacity at the summit in Vienna in June.

According to the International Energy Agency (IEA), within OPEC, more than 2 million bpd of spare capacity is held in Saudi Arabia.

“But we feel the industry is in better shape than when we started in 2016, and although we are seeing that improvement, we certainly don’t feel we are where we need to be with complete market stability,” the energy minister of OPEC’s largest producer and de facto leader told Reuters.

Al-Falih reiterated his previous comments that Saudi Arabia doesn’t see yet the ‘mission accomplished’, despite the fact that the global oil oversupply in developed nations has dropped very close to the five-year average—OPEC’s current metric to measure the success of the production cuts.

Despite the fact that the oil glut was estimated to have been all but eliminated as of March, al-Falih told CNBC after a meeting of energy ministers of OPEC and allies on April 20:

“We have to be patient. We shouldn’t jump the gun, we shouldn’t be complacent and listen to some of the noise such as ‘mission accomplished’. I think we still have work ahead of us.”

Speaking to Reuters today, al-Falih once again dismissed reports that Saudi Arabia was targeting a specific price of oil, after reports that it is shooting for $80 or even $100 oil.

“For sure we are not targeting a price. Our objective all along has been to bring stability, rebalancing and equilibrium back to the oil markets,” al-Falih told Reuters.

By Tsvetana Paraskova for Oilprice.com

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  • Naomi on May 09 2018 said:
    Saudi Arabian oil competes with light sweet Permian frack for international refinery capacity. An extra 6 million barrels/day of Permian oil is coming. While US prices for heavy oil to fit US refiners may rise, the international price is going lower.

    New refineries must be built. Saudis lack the labor supply to staff refineries. US & Canadian regulations prohibit new refineries in North America. Graft and unstable governments prohibit investment in South America. India, Russia, and China lack rule of law. Europe is hostile to carbon, period. Refining petroleum products is a giant business opportunity for a stable democracy somewhere in the world. I suggest Philippines, Falklands, Uruguay, Iceland....
  • Mamdouh G Salameh on May 08 2018 said:
    Saudi Arabia’s leadership of OPEC is underpinned not only by the fact that it is OPEC’s biggest producer and exporter but also by the fact that it holds a spare capacity estimated at 2 million barrels a day (mbd). This capacity gives Saudi Arabia the ability to impact on global oil supplies and prices.

    With strong global demand for oil and a decline in global investments since the oil price crash in 2014, Saudi Arabia’s spare capacity might not be enough to temper a strong surge of oil prices, hence the Saudi oil minister Mr Khalid al-Falih’s worry about tight production capacity.

    As an astute reader of the global oil market, Mr al-Falih would not target a specific price for oil. We know that Saudi Arabia and the majority of OPEC members need an oil price higher than $100 a barrel to balance their budgets. He will let the oil market determine what price the global economy can tolerate. This price could be much higher than $100.

    That is why the Saudi oil minister rebuked the IEA when it said “mission accomplished” over the re-balancing of the oil market. He and many oil experts around the world has no confidence in any IEA’s utterances on prices or supplies.

    On the basis of current and projected market fundamentals this year and next, I project an oil price ranging from $75-$80 in 2018 rising to $80-$85 in 2019 and hitting $100 or higher in 2020.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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