Saudi Arabia Says Oil at $50 Won’t Hinder Market Recoveryby
Energy companies won’t rush back to investment at $50 a barrel
Saudi oil minister speaks in briefing after OPEC meeting
Oil prices at $50 won’t allow shale oil and other higher-cost producers to lift supply to levels that hinder market recovery, Saudi Arabia’s oil minister said.
Prices need to be at level above $50 a barrel for more crude supplies to come back to the market following a slump over the past two years, Khalid Al-Falih, Minister of Energy, Industry and Mineral Resources, told reporters in his suite in a Vienna hotel.
"I talk to a lot of industry executives and board members. I don’t think you are going to see a rush back into investments at $50," he said after attending the biannual meeting of the Organization of Petroleum Exporting Countries on Thursday in the Austrian capital.
OPEC, which produces about 40 percent of the world’s crude output, decided Thursday to stick to its policy of unfettered production after its 13 members failed to agree on a ceiling. Thursday’s meeting follows a recovery in oil to almost $50 a barrel from below $30 in January. That suggests OPEC’s Saudi-led decision in 2014 to maintain output amid a global glut is finally paying off, with higher-cost producers cutting back.
Al-Falih, who was appointed oil minister last month to replace Ali al-Naimi, said that he doesn’t have a clear number for the price that will allow crude supply to come back rapidly.
“I don’t know what that level is,” he said. “But I think the level is going to be higher than $50. I think we tested $100 to $110 and we’ve found it was bringing in too much supply. So take a guess, it’s somewhere in between.”
Saudi Arabia is not against shale oil development and would like to see more of such supplies, though at levels that don’t disrupt the market balance, Al-Falih said.
Shale production growth of 200,000 to 300,000 barrels a day is “fine,” Al-Falih said. Shale output is necessary because it fills a gap in the market, but its growth should not be at levels before 2015 when annual production was rising by 800,000 barrels a day, he said.