Saudi Arabia’s target for reducing Brent crude to $100 a barrel may be difficult to sustain as declining production capacity and Europe’s ban on Iranian imports put upward pressure on prices, according to a former executive of Saudi Arabian Oil Co.
“The $100 for Brent is quite a correction and it will be a challenge to sustain such a low price beyond the short term,” Sadad al-Husseini, the founder of Husseini Energy, a Dhahran-based researcher, said today in an e-mail.
Brent crude is trading at about $111.50 a barrel in London after dropping 13 percent since the start of March as concern eased that supplies from the Middle East would be disrupted. Prices may fall further as global supply is outstripping demand, Saudi Oil Minister Ali al-Naimi said May 13. “We need to get the price to a level of around $100” for Brent, al-Naimi said.
OPEC’s spare capacity dropped to 2.38 million barrels a day in April, compared with 2.54 million the previous month, according to the International Energy Agency. That figure excludes Iraq, Nigeria, Libya and Iran.
Capacity is being eroded throughout the Organization of Petroleum Exporting Countries, Mexico and Russia, according to Al-Husseini, who left state-run Saudi Arabian Oil in 2004 as executive vice president for exploration and development.