JEDDAH: OPEC does not need to cut output next year, according to the latest figures on supply and demand, the oil minister of top exporter Saudi Arabia told Reuters on Tuesday.
Demand for Saudi crude was increasing, and this was evidence the world s economy was recovering from recession, Ali Al-Naimi said in a wide-ranging interview, which touched on alternative energy as well as fossil fuel.
No, based on the current (demand and supply estimates), there is no need of course, right now, Naimi said, when asked if OPEC would need to cut supply in 2010. He spoke ahead of the inauguration of the King Abdullah University of Science and Technology (KAUST), near the Red Sea port of Jeddah.
But you never know, this is a moving target, it is a very active market. The world economy seems to be recovering. I hope it will recover fast and therefore it will impact demand. If demand rises of course supply has to match it… Demand for our oil is rising, and so we are – at least I am – convinced that economic growth is started and will continue.
Global oil stocks have climbed above the five-year average in defiance of OPEC output curbs that aimed to match supply with a fall in demand following the economic downturn.
Some oil market observers have said the producer group, which pumps more than a third of the world s oil, would have to cut output again next year to balance the market.
OPEC has held output targets steady since December last year, when it announced the final stage of a record 4.2 million bpd reduction in supply which it enforced with a high level of discipline.
The curbs helped the oil price recover to more than $70 from a low of $32.40 in December and Naimi has for several months voiced confidence the economy would recover and oil prices would be strong enough to encourage investment without stifling nascent growth.
Prices extended gains on Tuesday after the Naimi interview.
At OPEC s last meeting earlier this month, the minister brushed aside concerns within the oil community about high inventories, saying economic growth was driving the price.
A relaxed Naimi spoke extensively to reporters on the sidelines of the OPEC talks, but he rarely gives interviews to news agencies.
Price high enough
Oil at between $70-$80 a barrel would draw investment in new energy supplies and prevent a future supply crunch, Naimi said. The kingdom has targeted around $75 as a fair price for both consumers and producers.
As long as the prices are where they are, like $70 to $80, I think investments will continue… and with so much spare capacity available in the world now we foresee no shortages in the future, he said.
Naimi reiterated Saudi Arabia was pumping around 8 million bpd of oil and its output capacity was 12.5 million bpd.
Saudi had no plans for now to develop more capacity after completing the boost to 12.5 million bpd this year, Naimi said. The kingdom s spare capacity was well above the 1.5 million to 2 million bpd it aims to keep to deal with any surprise global supply outage.
Let us see what happens to world-wide demand and if we see significant growth, we have a policy of maintaining between 1.5 to 2 million bpd spare capacity all the time… So we are not thinking today about future expansion but you know, you have to spend a lot of money to stay where you are.
As oil prices have dropped from the record of nearly $150 a barrel hit in July last year, reducing profits for energy producers, the price of new projects has also fallen because other commodities have become cheaper and labor costs have decreased.
The estimated cost of a giant new petrochemical venture between state oil giant Saudi Aramco and US Dow Chemicals has fallen to $17 billion from around $20 billion, Naimi said.
University and future energy
Research at KAUST may help Saudi Arabia to develop solar energy to provide a significant share of the kingdom s power needs, Naimi said.
It aimed to make solar a major contributor to energy supply in the next 5-10 years, he added, and Saudi Arabia aspires to export as much solar energy in the future as it exports oil now.
Apart from cleaning up domestic fuels to reduce emissions, the kingdom was also looking at carbon capture and sequestration, Naimi said.
KAUST would also eventually carry out research into algae for storing CO2 emissions, he added.
