Saudi sees robust oil fundamentals

Prolonged low prices could threaten security of supply

DOHA, Nov 9, (RTRS): Long-term oil market fundamentals remain robust but prolonged low prices could threaten security of supply and pave the way for a price spike, Saudi Arabia’s vice oil minister said on Monday.

The world’s largest crude exporter will continue investing in its oil and gas sector, Prince Abdulaziz bin Salman said in a speech at an Asian energy conference in the Qatari capital Doha.

“Supply and demand patterns indicate that the long-term fundamentals of the oil complex remain robust,” he said.

The comments suggest OPEC heavyweight Saudi Arabia is satisfied with its strategy of not cutting production and allowing low prices to reduce supplies, without losing market share to competitors.

Oil prices, at around $47 a barrel, have more than halved since July 2014 on ample supplies.

The Organization of the Petroleum Exporting Countries meets to review policy on Dec 4. Two other OPEC officials on Monday made upbeat comments about the 2016 outlook, suggesting big changes are unlikely.

Prince Abdulaziz said cuts in oil industry investment elsewhere in the world would lead to a drop in crude supplies from non-OPEC countries in 2016 and beyond that was unlikely to be reversed. Meanwhile, growth in demand fuelled mainly by Asia would remain strong, though slower than in the past.

“Non-OPEC supply is expected to fall in 2016, only one year after the deep cuts in investment,” he said.

“Beyond 2016, the fall in non-OPEC supply is likely to accelerate, as the cancellation and postponement of projects will start feeding into future supplies, and the impact of previous record investments on oil output starts to fade away.”

Prince Abdulaziz said a prolonged period of low oil prices was unsustainable,

warning it could “reduce the resilience of the oil industry, undermining the future security of supply and setting the scene for another sharp price rise”.

“Just as the assertions, heard a few years ago — that the oil price would reach $200 a barrel — were proved wrong, so the recent assertion that the oil

price has shifted to a new low structural equilibrium will also turn out to have been wrong.”

Oil companies around the world have deferred some $200 billion worth of projects including complex, expensive ventures that hold huge resources, such as Canadian oil sands and deepwater projects in Africa and southeast Asia.