Saudi Arabia Says Oil Production Cut Not to Boost PriceNayla Razzouk
Saudi Arabia denied what it said were suggestions that it cut oil production in December to push crude prices higher and accused unidentified media of misinterpreting the kingdom’s response to weaker demand.
The world’s biggest crude exporter is “strongly committed to a stable oil market” and is “optimistic that economic uncertainties will pass and growth will resume in 2013,” Ibrahim Al-Muhanna, an adviser to Oil Minister Ali al-Naimi, said today in a statement e-mailed to energy journalists.
Saudi Arabia reduced output in December by 4.9 percent to 9.025 million barrels a day, the lowest level in 19 months, a Gulf official with knowledge of the country’s energy policy said last week. The kingdom is the largest member of the Organization of Petroleum Exporting Countries and the only one with significant unused capacity to produce more.
Some recent media reports were “categorically wrong” for interpreting the decrease in Saudi output last month as a “deliberate attempt” to push oil prices higher, Al-Muhanna said. “Production is primarily driven by customer requirements, not by price levels. It is the market which sets the price of oil.”
February contracts of Brent crude, the benchmark for more than half of the world’s oil, were at $111.24 a barrel, up 60 cents, at 1:20 p.m. on the London-based ICE Futures Europe exchange. Brent gained 3.5 percent last year and has risen 0.1 percent this month.
Saudi production “fluctuates month to month and depends on a range of domestic, regional and international factors,” he said. Demand weakened in Saudi Arabia in the fourth quarter of last year after peaking in the summer, he said. International demand for Saudi oil also fell, because of slower growth in the euro-area and concerns about budgetary challenges in the U.S., he said.
OPEC forecasts published in a monthly report on Dec. 11 indicate the group will need to lower output this year to align supply and demand. OPEC’s 12 members estimated that demand for the group’s crude will average 29.5 million barrels a day in the first quarter, or about 1.2 million less than it pumped in November.
The statement from Al-Muhanna, an unusual communication by an adviser at the Ministry of Petroleum & Mineral Resources, didn’t say which media companies’ reports made an incorrect assertion.