Oil Must-Reads As Saudis Nix Production Cuts

Speaking before an audience at the CERAWeek 2016 Energy conference in Houston, Saudi Arabia oil minister Ali al-Naimi said that the kingdom will not lower production from its current levels, resisting calls to slash output in an effort to boost prices.

“The freeze I’m sure will give people in the market some hope, that something will happen and it will happen – but we are not banking on cuts because there is less trust”, al-Naimi said.

Naimi’s comments come a week after a provisional freeze suggestion was mentioned between oil exporters Saudi Arabia, Russia, Qatar and Venezuela.

At the same time, industry data showed a further increase in USA crude stockpiles and the message out of Iran was that it clearly had no interest in limiting production after sanctions against it were lifted.

“It is going to end”, al-Naimi said. This is a “more efficient” way for the market to rebalance than cuts by low-priced producers like Saudi Arabia, which would only delay the “inevitable reckoning” needed for supply and demand to realign, he said.

Benchmark Brent crude futures settled down $1.42, or 4 percent, at $33.27 a barrel, while US crude futures fell $1.52, or 4.6 percent, to $31.87 a barrel.

Nigeria, Africa’s biggest oil producer, has been suffering from a slump in crude prices that has eroded vital oil revenues and hammering its currency.

OPEC Secretary-General Abdullah al-Badri said on Monday that if successful a freeze could trigger other action but the days when the producer group was responsible for cutting output alone are over. “Then we can decide, but we are very cooperative on this”, Iraq’s oil minister Adel Abdel Mahdi said on Wednesday in Japan. Companies will rise from those ashes with more conservative leadership, and eventually make US shale the leading oil supplier in the world.

The toll from low oil prices is also spreading to banks that have exposure to the energy sector, as roughly a third of U.S. shale oil producers at high risk of slipping into bankruptcy this year, according to a study by Deloitte. Divisions over the conflict in Syria – where Saudi Arabia and Russian Federation back opposing sides – are also an obstacle.

And merely not adding more barrels to the market may have little impact on the excess supply, given that OPEC production is running at its highest levels in many years and increased further in January. Below is a chart of crude oil production using statistics from the US Department of Energy.