Saudi Oil Minister Ali al-Naimi on Wednesday shrugged off suggestions that the world’s biggest crude exporter might cut production to reverse the deepest price slump in years, saying the Kingdom’s output had remained steady through last month.
Naimi’s comments on the sidelines of an annual U.N. climate change conference in Lima, Peru, stuck to the message he laid out at OPEC’s meeting two weeks ago: the market would be left to balance itself without the Kingdom’s intervention. That stance was seen as a shift from longstanding Saudi policy to act as a swing supplier.
Oil prices have dropped $13 a barrel since that November meeting. Yet asked on Wednesday whether he thought it would be necessary to reduce oil production prior to OPEC’s next scheduled meeting in June, Naimi responded: “Why should we cut production? Why?”
At the same event, Venezuela’s foreign minister and top OPEC emissary Raphael Ramirez provided his country’s answer to Naimi’s question: OPEC must act, he told Reuters, because “that is our job. We want stability in the market and predictability.”
Ramirez said Venezuela would evaluate whether to call for an emergency OPEC meeting after seeing how oil prices perform in the first quarter. Last month, Gulf producers overruled Venezuela’s push for an OPEC production cut.
The comments highlight growing division within the Organization of the Petroleum Exporting Countries. Core Gulf producers have the cash reserves to ride out a spell of lower prices, while more vulnerable economies like Venezuela’s are already strained by sub-$100 crude.
Naimi said the Kingdom produced 9.6 to 9.7 million barrels per day (bpd) of crude in November, a figure consistent with October estimates.
“That is not going to change unless other customers come and say they want more oil,” he said.
His comments came after U.S. data showed a sharp rise in weekly U.S. oil inventories, and OPEC cut its forecast for demand for its crude in 2015 to 280,000 bpd below its previous expectation.
Oil prices slid 5 percent to their lowest since 2009.
MARKET FORCES AND CAPITALIST NATIONS
Saudi Arabia’s decision to let market forces prevail has triggered a free-fall in oil markets. Traders have been wondering how low prices must fall before the Kingdom finally intervenes, and looking for signs of a slow-down in output of U.S. shale fields that are feeding a global surplus.
For Venezuela, one OPEC member considered most vulnerable to a prolonged slide in prices, the situation is growing dire. On Wednesday the price of its crude export basket fell to a more than five-year low of $61.92.
“The drop in oil price is not good for anyone,” Ramirez said in an interview, reiterating that Caracas sees $100 as a ‘fair price’.
“The oil price has cycles that allow producing countries to build our production capability,” he added.
“Whoever is euphoric and applauding oil prices now is going to have to face the consequences later when there has not been enough capacity built to satisfy international demand.”
Naimi struck a different note.
“You come from capitalist nations. You know what the market does,” he told reporters. “For any commodity, what does it do? It goes up and down, up and down.”
Repeating an often-used line, when asked if he was worried about oil prices, he said “have you ever seen me worried?”