Saudi oil minister to struggling producers: ‘get out’ of the market

Oil prices slumped Tuesday after Opec kingpin Saudi Arabia’s oil minister reaffirmed opposition to a production cut to address global oversupply, expressing hope only for an output freeze next month.

He said, “It is very ridiculous, they come up with the proposal on freezing oil production and call for this freeze to take place in their 10 million barrels a day production vis-a-vis Iran’s 1 million barrels a day” planned production boost. West Texas Intermediate, the USA benchmark price for crude oil, was down about 3.5 percent to start the day at $30.77 per barrel, testing the psychological threshold of $30 per barrel. “If we can get all the major producers to agree not to add additional barrels then this high inventory we have now will probably decline in due time”, Minister Ali Al-Naimi said at the annual IHS CERAWeek energy conference in Houston, according to Reuters. In addition, Iran was the second largest exporter of oil before sanctions.

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.

Iran’s oil minister said the accord – backed by Saudi Arabia, Russia, Qatar and Venezuela – placed “unrealistic demands” on the Persian Gulf producer, the ministry’s news agency Shana reported Tuesday. The American Petroleum Institute (API) had earlier disclosed that crude inventories witnessed a 7.1 million barrel growth over the preceding week.

“Crude oil prices have topped out…” Even as crude dropped about 70 per cent to 12-year lows, Saudi Arabia insisted that other producers would have to join in before it considered curbing production.

Traders were cautious ahead of the release later Wednesday of data on USA commercial crude stockpiles which have been rising for weeks, indicating softer demand in the world’s top energy consumer.

Al-Naimi argued that Saudi Arabia is “not chasing market share” but instead serving its customers. “The lack of geopolitical cooperation will keep OPEC production high”, ANZ bank said.

Iraq’s oil production was 4.775 million barrels per day (bpd) in January and the Opec member now exports “nearly 4 million bpd” including shipments from the northern Kurdish region, Alamri said.