Oil Markets Balanced at $100 a Barrel, Naimi Adviser Says

Oil markets will be balanced this year with Brent crude at about $100 a barrel in Europe where demand continues to decline, said an adviser to Saudi Oil Minister Ali al-Naimi.

Increasing output from shale in the U.S. will help stabilize the market, and the cost of producing oil from fracking, $60 to $90 a barrel, will set a crude floor price of about $70, Ibrahim al-Muhanna said today at a meeting of the Organization of Arab Petroleum Exporting Countries in Kuwait.

Saudi Arabia, the world’s largest oil exporter, has the greatest ability within OPEC to influence prices by using its spare capacity to meet swings in demand or supply. Worldwide demand will probably rise by about 1 million barrels a day this year and “exceed the average level of 90 million barrels a day for the first time in history,” Muhanna said.

The oil market will stay balanced this year, with the Organization of Petroleum Exporting Countries maintaining its production level of 30.5 million barrels a day, he said. Muhanna anticipates drawdowns from global commercial oil stockpiles in the fourth quarter.

Worldwide demand will rise by as much as 1.2 million in 2014, Muhanna said. Markets will remain balanced even if OPEC keeps output at current levels, in part because non-OPEC supply will help to make up the difference, he said.

China leads nations where demand is rising, he said. Oil producers such as Iraq, Iran, and Libya will be among other countries where demand will grow this year, he said.

Boosting Output

OPEC, which supplies about 40 percent of the world’s oil, produced 30.19 million barrels a day last month, according to OPEC estimates based on secondary sources. That compares with 30.29 million in February.

OPEC needs to boost output to 34 million barrels a day by 2020, Muhanna said.

Saudi Arabia increased output to 9.12 million barrels a day in March from 9.08 million the previous month, OPEC said. The kingdom said in its direct communication with the group that it pumped 9.14 million barrels a day.

Al-Naimi said March 18 that $100 a barrel is a “reasonable” price that won’t choke global economic growth. Brent crude, the benchmark for more than half the world’s oil, averaged about $112 a barrel last year, and futures for May settlement traded at $105.33 a barrel at 5:35 p.m. London time today.

OAPEC was established in 1968 to foster the development of the petroleum industry in member states as part of an economic integration plan among Arab countries. Seven of the nations within OAPEC are also within OPEC.

To contact the reporter on this story: Wael Mahdi in Kuwait at wmahdi@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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