Saudi Arabia Sticks To Policy Of Pumping Crude Oil To Protect Global Market Share
$OIL
Saudi Arabia will stick to its policy of pumping Crude Oil to protect its global market share, according to latest reports.
Officials said that the Kingdom would produce enough Oil to meet customer demand, ahead of a 4 December meeting of OPEC members in Vienna.
“The only thing to do now is to let the market do its job,” said state-owned Saudi Aramco’s Chairman Khalid al-Falih. “There have been no conversations here that say we should cut production now that we have seen the pain.”
The world’s largest Crude Oil producer abandoned its policy of reducing supplies to stabilize prices last November. The Crude Oil price has since declined from a high of 115 bbl last year to a low in the mid 40’s.
Monday, on ICE Exchange in London Brent Crude Oil traded at 47.19, -0.23 for the Dec contract.
Officials in Riyadh argue that past OPEC cuts raised prices to levels where more expensive production like shale Oil and deep-sea Oil was viable, according to the publication.
“$100 Crude Oil was perceived as a guarantee of no risk for investment. Now, the insurance policy that’s been provided free of charge by Saudi Arabia does not exist any more,” Mr. Falih added.
The country’s Crude Oil leadership expects its policy to be vindicated in one to 2 years time when the supply glut is swallowed by global demand, bringing prices to 70-80 bbl.
This policy has faced criticism as Saudi Arabia’s Oil dependent economy has suffered. The government is dipping into its financial reserves to fund this year’s 20% of GDP budget deficit.
Elsewhere, infrastructure projects are being delayed and spending in government departments is being squeezed.
“We knew that it was going to be painful but the extent of the pain went beyond our expectations,” said Mr. Falih. “The market has overreacted as it typically does in such down-cycles.”
He raised concerns regarding a future price jump due to the number of projects being cancelled rather than just deferred.
“That’s necessary, but what will happen five to 10 years from now? Investment is needed.”
| HeffX-LTN Analysis for OIL: | Overall | Short | Intermediate | Long |
| Neutral (-0.20) | Neutral (-0.21) | Neutral (-0.12) | Bearish (-0.26) |
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HeffX-LTN
Paul Ebeling
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