Saudi Arabia’s oil minister dismissed talk of a price war as having “no basis in reality” in his first public comments since crude plunged into a bear market last month.
“Saudi oil policy has remained constant for the past few decades and it has not changed today,” Ali al-Naimi said at a conference in Acapulco, Mexico, yesterday. “We want stable oil markets and steady prices, because this is good for producers, consumers and investors.”
Brent crude futures plunged below $80 yesterday for the first time since September 2010 on concern OPEC is in no hurry to halt a four-month slide in prices. Saudi discounts offered to Asian customers in October triggered speculation that the Organization of Petroleum Exporting Countries’ largest member had changed policy and was seeking to preserve market share, instead of supporting prices by curbing supply. OPEC ministers will meet Nov. 27 in Vienna.
“This is very Greenspan-like, an intentional lack of clarity,” Mike Wittner, head of oil market research at Societe Generale SA in New York, said by phone yesterday. “In OPEC it’s really only the Saudis that matter but I don’t think we got any clear direction here and I don’t think we will before the meeting. I can go through it point-by-point and find a bullish interpretation and a bearish interpretation.”
Analysts and traders were often unable to come to agreement about the meaning of comments of former Federal Reserve Bank Chairman Alan Greenspan, who resigned in 2006.
Oil slumped into a bear market in October, the result of a surge in shale drilling that has lifted U.S. production to a three-decade high as well as slowing growth in global demand. The drop has caused financial pain for some OPEC members, prompting Ecuador, Venezuela and Libya to call for action to halt the slide.
“Talk of a price war is a sign of misunderstanding -- deliberate or otherwise -- and has no basis in reality,” al-Naimi said at a natural gas forum. “Saudi Aramco prices oil according to sound marketing procedures -- no more, no less.”
Before yesterday’s appearance, al-Naimi hadn’t spoken publicly since Sept. 11.
Saudi Arabia’s official selling prices to Asia, which were reduced last month to the lowest in six years and increased this month, “take into account a host of scientific and practical factors, including the state of the market, refinery margins and long-term relationships with customers,” he said. Besides these adjustments, “Saudi Arabia does not set the oil price, the market sets the price.”
OPEC won’t cut its collective output target at this month’s meeting, according to Kuwaiti Oil Minister Ali Al-Omair. Kuwait has no plans to trim its production, which is set to climb to 4 million barrels a day by 2020, Al-Omair said Nov. 10. It pumped 2.85 million a day in October, on par with the United Arab Emirates and behind Saudi Arabia and Iraq among OPEC nations.
“I would be shocked if OPEC does anything this month,” Chip Hodge, who oversees a $9 billion natural-resource bond portfolio as senior managing director at John Hancock in Boston, said by phone yesterday.
The U.S. Energy Information Administration cut its 2014 and 2015 crude price forecasts in its monthly Short-Term Energy Outlook yesterday. The EIA trimmed its Brent crude estimate for next year to $83.42 from $101.67.
Brent for December settlement declined $2.46, or 3.1 percent, to end today’s session at $77.92 a barrel on the London-based ICE Futures Europe exchange. It was the lowest close since Sept. 9, 2010.
West Texas Intermediate crude for December delivery dropped $2.97, or 3.9 percent, to settle at $74.21 a barrel on the New York Mercantile Exchange. It was the lowest settlement since Sept. 21, 2010. Prices are down 31 percent since reaching $107.73 on June 20.