Saudi Arabia, the largest producer in the OPEC oil cartel, cannot reduce its output, the kingdom's oil minister said on Thursday despite plunging prices.
Leading OPEC producer Saudi Arabia said on Thursday that competitive pressures prevent it from reducing output, and the kingdom can weather plunging oil prices.
Oil Minister Ali al-Nuaimi denied that “political objectives” play a role in decisions about production, and expressed optimism for the future despite crude’s price drop of about 50 percent since June.
“It is difficult, or even impossible, for Saudi Arabia or OPEC to undertake any measure that would lead to a reduction in (their) share of the market and an increase in that of others” who do not belong to the cartel, he said in comments to the official Saudi Press Agency.
Nuaimi said while OPEC’s output had not changed in years, production by non-cartel nations “has been increasing constantly”.
He added that price fluctuations “are normal” for commodities including oil.
“The situation that we and the world currently face is temporary,” Nuaimi said, citing a combination of factors including slower global growth, increased supply, and reduced demand growth for oil.
“The global economy, particularly the economies of emerging countries, will resume growth steadily, and then demand for oil will also grow.”
Crude prices traded above $100 a barrel earlier this year but have fallen to multi-year lows since June.
Prices plunged even further after the Organisation of the Petroleum Exporting Countries decided last month against cutting production.
The cartel pumps about 30 percent of global crude.
Oil markets gained on Thursday after recent volatility.
US benchmark West Texas Intermediate crude for January delivery jumped $1.76 to $58.23 a barrel, while Brent North Sea crude for February rose $1.97 to $63.15.
The oil market has become increasingly competitive with the surge in production from American shale oil fields.
Analysts have said Saudi Arabia is content to see shale oil producers — and even some OPEC members — suffer from low prices rather than reduce output to boost prices.
– Saudi strong enough –
OPEC last month reaffirmed its production ceiling of 30 million barrels per day, of which Saudi Arabia is pumping about 9.6 million bpd.
Analysts say Saudi Arabia is strong enough to survive lower prices, a point also made by Nuaimi.
He said factors including the kingdom’s “huge financial reserves” help it to withstand short-term variations in oil income.
On Wednesday Finance Minister Ibrahim bin Abdulaziz al-Assaf said his country would continue massive public spending in its 2015 budget which financial analysts say could be approved as early as Monday.
The drop in oil prices sparked turmoil this week on global stock markets where investors were concerned about the effect on oil firms as well as the crude-dependent economy of Russia.
United Arab Emirates Oil Minister Suhail al-Mazrouei said in Abu Dhabi that OPEC had not contributed to the increase in crude supply “and is not logically responsible for curbing the impact” of it.
He pleaded for a return to equilibrium between supply and demand “in the interest of the world economy” but added that time and patience would be required.
Mazrouei, whose country belongs to OPEC, accused “certain firms of being responsible for the excess supply” at the start of the price fall.
He did not identify them.