Tuesday, December 23, 2014

OPEC: No Output Reduction Even at $20.

Saudi Arabia's oil minister, Ali al-Naimi
In an unusually frank interview, Ali al-Naimi, the Saudi oil minister, who was a sheep herder in his youth, tore up Opec’s traditional strategy of keeping prices high by limiting oil output and replaced it with a new policy of defending the cartel’s market share at all costs, reports FT.

“It is not in the interest of Opec producers to cut their production, whatever the price is,” he told the Middle East Economic Survey. “Whether it goes down to $20, $40, $50, $60, it is irrelevant.”

Naimi said that if the kingdom reduced its production, “the price will go up and the Russians, the Brazilians, US shale oil producers will take my share”.

Very true.  Naimi seems to understand basic economics than most of MSM. At lower prices, high cost producers, such as US shale oil producers, will be driven from the business and the price will start to climb once again.

Naimi said Saudi Arabia and other Gulf oil producers would be able to withstand a long period of low crude prices, largely because their production costs were so low — at only about $4-$5 a barrel.
But he said the pain will be much greater for other oil regions, such as offshore Brazil, west Africa and the Arctic, whose costs are much higher.

“So sooner or later, however much they hold out, in the end, their financial affairs will limit their production,” he said.

“We want to tell the world that high efficiency producing countries are the ones that deserve market share,” said Naimi added. “If the price falls, it falls . . . Others will be harmed greatly before we feel any pain.”


  1. I would read this as "Oil will no longer go too high in price ever again."

    Now that the means to extract hard-to-reach energy has been applied and proven, the Saudis can no longer enjoy their cartel as much. The new technologies have capped the price. Capped it, that is, until OPEC can maneuver governments to legislatively stymie the competition.

  2. So if they can afford for oil to go down to 20 bucks a barrel, does this mean they can afford to pay for their own damn military? Sounds like, at 20 bucks a barrel, we could leave that "strategically sensitive" region all together, huh? Last aircraft carrier home buys the beer!

  3. could it be that the Saudi Monarchy have issued themselves a insurance policy against the ISIS and their Wahabbi backers?

  4. I haven't heard much from the peak oil crowd lately.

    So much for those 'declining' Saudi oil fields that can't produce the volume any more. I suppose the peak oil crowd will show up as the shale companies fold trying to spin it somehow.