Saudi oil minister says market should handle low prices

Saudi Oil Minister Ali Al-Naimi urged global energy executives to “stick together” through the worst industry slump in decades, saying he was confident that growing support for a deal to freeze output would ease a global glut.

On the New York Mercantile Exchange, WTI crude for April delivery wavered between $31.66 and $33.52 a barrel before settling at $31.81, down 1.58 or 4.73% on the day.

“There is no sense in wasting our time in seeking production cuts”, al-Naimi said.

“It sounds harsh, but it is the most efficient way to more balanced markets”, he said.

Russian Federation joined some members of the Organization of Petroleum Exporting Countries last week in embracing a move to freeze production at January levels in an effort to pull markets away from the supply side.

“Many integrated oil companies are simply unable to invest right now because low oil prices have weakened their earnings and pushed their cash flow deeper in the red”, said Waheed Sheikh, a Moody’s Associate Analyst. “The pace of production declines in the USA right now is simply not enough to absorb the global production surplus that will likely only get worse with Iran set on continuing to increase output”.

“Freeze is the beginning of a process”, Naimi said at a Houston energy conference. “We are not looking to cut production or anything but let’s have a dialogue”.

However, Iran still faces significant hurdles to boost its oil production meaningfully beyond those levels.

“‘Freeze’ gave people in the market hope that something might happen”, al-Naimi said.

However, some conference attendees like Albert Nahas, vice president for International Government Affairs for Cheniere Energy, expressed their skepticism about oil producing countries being interested in restraining their production.

Poorer OPEC members, including Nigeria, have been hard-hit by the price drop but even the wealthy Gulf states have been forced to adopt austerity measures to cope with falling oil revenues.

The report forecast OPEC crude oil production capacity would rise by only 800,000 bpd by 2021 as low oil prices force delays to development projects in the early period of the forecast.

The IEA, however, said in the longer term, US production would also recover on improving cost efficiency, lifting output to a record 14.2 million bpd by 2021, compared with a peak of over 9.5 million bpd in 2015.

The oil market was accustomed to high prices that hovered above $100 a barrel for years, he said, but things changed.

In his speech Tuesday, al-Naimi said he has no concerns about oil demand.

Iran should have increased production by 500,000 barrels a day by March 20, the end of the Iranian calendar year, Shana reported on Wednesday, citing Roknoddin Javadi, managing director of National Iranian Oil Co.