Minister Ali al-Naimi broke months of silence on Wednesday to reaffirm the kingdom’s longstanding policy of seeking stable global markets, dismissing talk of a “price war” but offering no insight on his response to tumbling crude prices.
In his first public comments since global oil prices dived to four-year lows near $80 a barrel, Naimi said the world’s biggest exporter wanted to work “with other producers to ensure price stability for the interest of producers, consumers and the industry at large”.
“Talk of a price war is a sign of misunderstanding, deliberate or otherwise, and has no basis in reality,” Naimi told an event in the Mexican Pacific resort of Acapulco.
Oil markets have tumbled on growing speculation that Saudi Arabia is more concerned with maintaining market share than supporting prices, with some traders pointing to reductions in the kingdom’s monthly oil price formula as evidence that it is at war with fast-growing U.S. shale or other rival producers.
Naimi dismissed this notion, saying: “Saudi Aramco prices oil according to sound marketing procedures, no more and no less. These take into account a host of scientific and practical factors, including the state of the market.”
Naimi made no comments about possible action at a pivotal meeting of the Organization of the Petroleum Exporting Countries (OPEC) on Nov. 27. Some cartel members are pressing for action to boost prices that have slumped more than 30 per cent since June, but core Gulf members have thus far said they see no need for curbs.
Analysts said Naimi’s comments covered familiar and oft-repeated themes, shedding little new light on his view of a potential turning point in oil markets. The rise of the U.S. shale boom and stunted demand in Europe and China is leading some analysts to predict years of lower prices.
“This is classic Naimi speak, not expressly saying what he’ll do at the OPEC meeting,” John Kilduff, partner at New York hedge fund Again Capital, said.
“Parsing his words sounds to me like the Saudis will not cut. Holding on to their market position means more than anything else to Saudi Arabia now.”
Others were less certain. Global benchmark Brent crude oil was little changed following Naimi’s comments, trading 50 cents lower at $81.17 a barrel. On Tuesday Brent hit $80.46, its lowest since 2010.
“I could take those comments, point by point, and do equally bullish and bearish interpretations,” said Mike Wittner, head of global oil and commodities research at Societe Generale.
“Those comments are very Greenspan-like in their intentional lack of clarity,” he said, referring to former U.S. Federal Reserve Chairman Alan Greenspan.
Asked afterwards by Reuters if current global oil prices were fair, Naimi did not respond.
NOT POLITICIZING OIL
Saudi Arabia has not commented publicly on the fall in oil prices, prompting some industry watchers to wonder whether the kingdom may be moving away from a policy of managing the market toward an equilibrium of around $100 a barrel, which Naimi has often called a “fair” price, and instead pursuing geopolitical goals.
“We do not seek to politicize oil … For us, it’s a question of supply and demand, it’s purely business,” he told the conference.
“We want stable oil markets and steady prices, because this is good for producers, consumers and investors,” Naimi added.
“It is therefore vital that OPEC and non-OPEC nations, producers and consumers, continue their dialogue.”
Despite rising world demand, OPEC expects demand for its oil to fall in 2015 as higher supply outside the group, particularly in the United States due to its shale energy production, squeezes its market share.
OPEC members including Kuwait have said a cut in output at the upcoming meeting is unlikely, but privately delegates are starting to talk of the need for some action, although they warn an agreement will not be easy to reach.