Oil producers around the world and especially in North America were unhappy that OPEC decided at its Nov. 25 meeting in Vienna against cutting production in order to reverse rapidly declining oil prices. Those same producers are likely to be even more angry when they learn that OPEC’s key swing producer, Saudi Arabia, recently increased its oil production and is now pumping about 10 million barrels per day – approximately a 350,000-bp/d increase in March over February production numbers.
The Saudi oil minister, Ali I. Naimi, has said repeatedly that the Middle Eastern kingdom is not prepared to lower production levels to prop up oil prices when other OPEC and non-OPEC nations refuse to do so.
Saudi Arabia has the ability to raise or lower oil production in order to impact oil prices on global oil markets. However, the oil ministry continues to say it is not prepared to go it alone. Naimi reportedly met privately with his counterparts from Russia and Mexico prior to the OPEC meeting. When they informed him they were not prepared to cut output, Saudi Arabia and OPEC made the decision not to change their existing production quotas.
The Saudis also claim that the current low-price environment is not the result of normal supply-and-demand economics.
Speaking recently at a meeting of international bankers and financiers in London, Ibrahim al-Muhanna, chief advisor to the Saudi oil minister, said: “I do not believe the fundamentals of supply and demand justified the sudden and rapid price fall during the second half of last year. The market was balanced, and commercial stocks were within their normal range. Yes, supply was starting to increase, but demand remained strong and there was not a very sudden rise in commercial stocks.”
Al-Muhanna said he believes the rapid price fall was not about market fundamentals, but rather was the result of speculation by oil traders. He added that “conspiracy theories” about Saudi Arabia wanting to hold on to market share and punish US shale producers were “incorrect.”