Saudi Assurance – No More Cuts #petroleum

By 30th December 2015 Industry News No Comments

For the consumer, they are words of comfort. For the producer, they are words of challenge. For the trader, they are words of guidance. The words to which I refer were recently spoken by Saudi Oil Minister Ali Al-Naimi “We will satisfy the demand of our customers. We no longer limit production. If there is demand, we will respond. We have the capacity to respond to demand,” he said.

Either you believe Minister Al-Naimi or you don’t. Personally I believe that he is expressing current Saudi policy, which places supplier reliability as the predominant obligation. Prices will not be controlled by artificially limiting supplies.

The other producers of the world would be foolish to ignore this blunt statement. While it would be wonderful, from their standpoint, for the Saudis to be willing to use supply extortion to raise prices, the Saudis have chosen another path. Al-Naimi could have easily said “Read my lips – no more cuts”, but he used other words with the same meaning.

Where does this leave OPEC and the rest of the producing world? Probably in a world of hurt, and very low oil prices, until it is recognized that oil producers, like any other business, must take responsibility for managing their own production and prices, THEMSELVES, and not continue along the path of hoping that another entity will save their bacon.