Saudi oil minister sees no reason for high oil prices
RIYADH -- Saudi Arabia's Oil Minister Ali al-Naimi said that there is no reason for current high oil prices, which are hurting European economic growth targets, but said the world's largest crude exporter will do what it can to mitigate them.
Writing a rare opinion piece for the Financial Times, Naimi sought to address consumer concerns on crude supply and production capacity, as benchmark Brent prices that have increased around 15% since the beginning of 2012 threaten to derail the recovery in the troubled economies of Europe.
"High international oil prices are bad news. Bad for Europe, bad for the US, bad for emerging economies and bad for the world's poorest nations," Naimi wrote in the piece published on the Financial Times website.
"The bottom line is that Saudi Arabia would like to see a lower price," he said. "It would like to see a fair and reasonable price that will not hurt the global economic recovery, especially in emerging and developing countries."
Naimi mostly reiterated comments he made last week to dismiss consumers' fears that the cushion of available oil is getting thin amid fears of disruption to Iranian exports.
"It is the perceived potential shortage of oil keeping prices high - not the reality on the ground," he said. "There is no lack of supply. There is no demand which cannot be met.
"Total commercial stocks for OECD nations are within target, and there is at least 57 days forward cover, enough to handle almost any eventuality," Naimi said.
The Gulf state's current capacity is 12.5 million bpd, way beyond current levels demanded, and a reliable buffer against any temporary loss of production, he said.
"I hope by speaking out on the issue that our intentions - and capabilities - are clear," he said. "We want to see stronger European growth and realize that reasonable crude oil prices are key to this."
Naimi's words are in stark contrast with consumers' remarks earlier this month at a Kuwait energy conference, that the amount of oil that could swiftly be brought on line if needed is shrinking.
“The markets are tight ... therefore there is need for more production,” US Deputy Energy Secretary Daniel Poneman said in Kuwait.
One major cause of consumer anxiety is that so-called spare production capacity - the amount of idle output that can be swiftly brought online if needed - is already more stretched than it was in 2011, when Libya's exports shut down during a civil war.
According to the US Energy Information Administration, that spare capacity stood at 2.5 million bpd on average in January and February, compared with 3.7 million bpd in the same period last year.
Iranian officials have also threatened to shut down the Strait of Hormuz, the route used to ship most Gulf oil and one-fifth of global supplies.
Markets are buzzing with talk that the US and UK might dip into their reserves, something President Barack Obama and UKJ Prime Minister David Cameron discussed earlier this month without making any decisions.
Wednesday, the French government said it was in talks with the International Energy Agency on whether to release crude from stocks.
The news, coupled with data that show a sharp rise in US crude inventories, forced oil prices lower Wednesday.
Dow Jones Newswires
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