Aramco Says Saudis Won’t ‘Singlehandedly’ Balance Crude Market
Saudi Arabia won’t balance global crude markets on its own even as prices fall to levels that are “too low for everybody” and threaten investment needed to meet long-term demand, the head of Saudi Arabian Oil Co. said.
“Supply and demand and the rules of economics will govern. It will take time for the current glut to be removed,” Chief Executive Officer Khalid Al-Falih said at a conference in Riyadh. “Saudi Arabia will not singlehandedly balance the market in a downturn,” he said, reiterating government policy.
The Organization of Petroleum Exporting Countries kept its production target unchanged at a Nov. 27 meeting, seeking to defend market share rather than support prices as it keeps pumping close to 30 million barrels a day. Saudi Arabia resisted calls from fellow OPEC members Venezuela and Iran to trim output. Saudi Oil Minister Ali Al-Naimi has said producers outside of the group should trim their output first.
Brent crude fell as much as 49 cents, or 1 percent, to $47.67 a barrel today, trading at $48.04 at 9:17 a.m. London time. Brent has averaged at least $99 each year since 2011, according to data compiled by Bloomberg.
Oil at close to $100 a barrel brought many new production sources, like shale oil, into the market, pushing supply ahead of demand as growth in developing countries slowed, Al-Falih said today. Saudi Arabia is maintaining its output capacity, and its exports are declining, he said.
The drop in prices will curb investment in the industry worldwide, Al-Falih said. Saudi Aramco, as his company is known, will lower planned spending this year to less than its initial target, he said. State-owned Aramco plans to invest $30 billion to $50 billion a year to maintain crude output, transform itself into the world’s largest refiner and expand its trading and chemical businesses, Al-Falih said.
The company also plans to more than double investment in unconventional sources of natural gas, which are harder to find and extract than more typical deposits of the fuel, Al-Falih said. Aramco has invested $3 billion to develop unconventional gas and plans to spend an additional $7 billion, Al-Falih said, without specifying dates for the actual or planned spending.
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- January 27, 2015
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