Saudi Arabia Curbs Speculation of a Crude Oil Production Cut

According to a report from Iran’s student news agency ISNA, the country’s oil minister said the production freeze is “laughable”, because it does not allow Iran to regain its production share.

Oil prices slid further on Wednesday after Saudi Arabia dismissed the possibility of a production cut and traders expected another increase in USA oil stockpiles.

Oil’s collapse to a 12-year low in 2016 amid a global glut pushed the ruble to a record low, put Russia’s economy on course for a second year of contraction and forced the government to consider budget cuts.

Iran is seeking to boost oil output by 1 million barrels a day within a year after sanctions were lifted in January.

Minutes before al-Naimi spoke, Iran appeared to discard its initial cautious welcome of the freeze deal reached in Doha, Qatar, by the four producers.

Without the agreement from Iran, the prospects for the deal on oil output freeze between Russia, Saidi Arabia, Venezuela and Qatar look precarious in the coming quarters, analysts of the US JP Morgan bank believe.

Saudi Arabia could produce oil profitably at $20 per barrel, Naimi asserted, a level well below current prices. Crude oil tumbled more than 4 percent.

“If some people freeze and others raise, then this is not a good policy”, Iraq’s Oil Minister Adel Abdul Mahdi said in an interview in Tokyo on Wednesday. Al-Naimi said freezing output was more realistic than cutting because not many countries are going to deliver, even if they say they will cut production.

April Brent crude oil futures on London’s ICE Futures exchange dropped by US$1.42, or 4.1%, to settle at US$33.27 a barrel.

Though many had hoped the recent talks between Russian Federation and Saudi Arabia to cap production were merely the first step toward stabilizing oil prices and resuscitating the oil sector, it was clear that Saudi Arabia has no intention of helping its competitors.

It was trading around $32.60 around the time al-Naimi began speaking at the IHS CERAWeek conference in Houston.

Though not explicitly mention, al-Naimi’s comments are believed to have referred to the United States’ shale industry and Canada’s oil sands – the two most expensive producers in the world. “There is less trust, why worry about cuts”, he said. “We don’t want to, but if we have to, we will”, he said. Oil prices have fallen 70 percent since mid-2014 as surplus crude piled up.