Saudi Arabia Says Oil at $50-$60 Ensures Adequate Global Supply
Officials from Saudi Arabia and Kuwait, key protagonists in shaping OPEC policy, said oil at $50 to $60 a barrel would ensure adequate global supply, setting out a potential price band for the producer club before its meeting in Vienna next month.
“A $50, $60 oil price — absent a supply accident — is sufficient to develop the low-cost resources to provide increases that will be necessary over the next three to four years,” Andrew Gould, board director at state-owned giant Saudi Arabian Oil Co., said Tuesday in London. His comments, at the annual Oil & Money conference in London, suggest Riyadh sees relatively little upside to prices in the short term. While benchmark Brent crude is up about 13% since OPEC reached a deal Sept. 28 to manage supply, it’s still trading at half its level of mid-2014, at around $52 a barrel.
Projections for $50 to $60 oil over the next 15 months are “logical” and “acceptable,” Kuwait’s acting Oil Minister Anas Al-Saleh said in a report from the state-run Kuwait News Agency. “Unless there are new developments in the major oil-producing countries, this scenario will be most likely,” he said.
Saudi Arabia and Kuwait were among oil producers to hold output at or near all-time highs in September as OPEC continued to defend market share against rival suppliers including the U.S. While many high-cost shale wells were shut in after oil’s collapse, some North American drillers are starting to bring back rigs.
A sustained rally will depend on OPEC’s ability to agree on individual quotas when it meets Nov. 30. Should the group succeed, a further price increase is likely to spur shale output, according to Fatih Birol, executive director of the IEA, who said he agrees that $50 to $60 is enough to meet short-term supply needs until 2020.
“This upward pressure on the prices would stimulate some high-cost producers to increase their production such as the U.S. shale oil,” Birol said Tuesday before the conference. “The price level around $60 would give a strong impetus to the bulk of the current U.S. shale industry.”
Others are looking for a higher price to proceed with longer-term projects. Hess Corp Chief Executive Officer John Hess said Tuesday that low prices have been “devastating” and producers need $60 to $80/bbl for “long-cycle” developments. A price of $50 would hold shale production flat, he said at the conference.
Source: World Oil
