http://saudigazette.com.sa/opinion/energy-outlook/inefficient-oil-producers-have-to-get-out-naimi/
‘Inefficient (oil) producers have to get out’: Naimi.
Syed Rashid
Husain CRUDE oil markets are gearing up for further bloodbath! When
Saudi Oil Minister Ali Naimi stood up to deliver his talk at the packed ballroom in
Houston last Tuesday during the
IHS CERAWeek, all eyes were focused on him.
Hundreds of energy industry executives, researchers, pundits and analysts had come to hear what the
OPEC’s most powerful voice had to say. And his message was blunt: OPEC is more than happy to ride out cheap crude prices until higher-cost producers are pushed out of the market.
The kingdom had no plans to cut its output to boost prices, he reiterated, underlining
Saudi Arabia was prepared to withstand $20 crude if needed to thin the herd. “We don’t want to, but if we have to, we will,” he said.
Minister Naimi’s message to the eager audience was clear. A coordinated production cut by OPEC and non-OPEC exporters was “not going to happen – because not many countries are going to deliver.”
Lack of trust is impeding, he emphasized. “There is less trust (among the producers), why worry about cuts.” And he added: “Not many countries are going to deliver. Even if they say they will cut production, they will not deliver, so there is no sense in wasting our time seeking production cuts,” he added. And that the proposed freeze in output at January levels would require “all the major producers to agree not to add additional barrels.”
Yet there appeared a specific reason behind the outburst from Minister Naimi. Just hours before, Naimi appeared before the jam packed ballroom to give his assessment of the situation, the
Iranian Oil Minister
Bijan Zanganeh was quoted as saying that
Iran had no interest in restraining production after sanctions against it were lifted, calling a joint
Russian/Saudi proposal for major exporters to freeze output “laughable”. “Some of our neighbors have increased their production to
10 million barrels a day… and now they have the nerve to say we should all freeze our production together,” Iranian news agency
ISNA quoted Bijan Zanganeh as saying. “So they should freeze their production at
10 million barrels and we should freeze ours at 1 million barrels – this is a laughable proposal,” he added. Naimi had to respond. And he did. For the output freeze agreement was based on the principle that all major stakeholders, and indeed Iran included, would agree and contribute to that.
Once Iran hardened its position, at least publically, Minister Naimi had little option to say something else that could have been music to the ears of some 2,800 delegated attending the annual mega event. And with this went down the hopes and expectations of and coordinated move by the stakeholders, both within and outside the OPEC, to stabilize the markets.
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- published: 28 Feb 2016
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