A leading Saudi Arabian oil official on Sunday refuted any accusations that his country was part of a politically motivated conspiracy to push oil prices lower.
“There isn’t any political dimension in what we do at the oil ministry,” Mohammed Al Madi, the Saudi representative on Opec’s board of governors, was quoted by Reuters as saying in Riyadh. “Our vision is commercial and economic.”
Hassan Rouhani, the Iranian president and other senior officials, as well as politicians from other oil-producing countries, including Venezuelan and Russia, have accused Saudi Arabia and its allies in recent months of deliberately engineering last year’s oil price collapse to further political aims.
Iran and Russia are both subject to US-led international sanctions which have hurt their oil and gas sectors – the former for its treaty-breaking nuclear programme and the latter for its annexation of Crimea and military involvement in eastern Ukraine.
Saudi Arabia has maintained that its decision as Opec’s de facto leader to leave oil production unchanged last November, even as oil prices were collapsing, was simply aimed at defending market share against a surge in higher-cost production, particularly from the United States.
“We didn’t mean to hurt anybody,” Mr Al Madi said. “Our vision is simply the following: the producers which have low costs have to have the priority to produce, but those who have high costs have to wait for their turn to produce.”
Although Mr Al Madi denied it, the Saudi policy is widely thought to be aimed mainly at US production, where new technologies have resulted in so-called shale oil production surging by more than 4 million barrels per day since 2009, to levels not reached since the 1970s.
The Saudi policy seems to be slow to take effect. US shale oil, while more expensive to produce initially, is proving resilient to lower oil prices. Production has kept rising this year even though oil rigs in use have declined, as producers focus on getting more output from larger fields.
Last week, the US energy information agency reported that domestic crude oil inventories rose by 9.62 million barrels to a record 458.5 million barrels.
As well as domestic production, US imports have been rising.
“As suspected, low [official selling prices] from Middle Eastern producers such as Saudi Arabia are also playing a part in higher imports, with Saudi [crude imports to the US] jumping by nearly 500,000 barrels per day to 1.1 million bpd [in the latest week], the highest in four months,” according to Energy Aspects, an independent energy analysis firm.
Worldwide, oil supply has been outstripping demand by about 1 million bpd for months, leading to higher inventories across the board, and the market is not expected to be back in balance until later in the year.
On Friday, the world benchmark North Sea Brent crude futures finished higher on the week for the first time in five weeks, gaining 65 cents to $55.32 on the week. It is down 52 per cent from last June’s high above $115 per barrel.
amcauley@thenational.ae
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