Al-Naimi optimistic oil prices will recover in few months

Global oil prices fell further on Thursday, with Brent reaching a new 17-month low but Minister of Petroleum and Mineral Resources Ali Al-Naimi played down the drop in oil prices saying this is not the first time crude prices slumped.
In early Thursday morning deals, Brent North Sea crude for October sank to $97.10 per barrel — the lowest point since April 18, 2013. And US benchmark West Texas Intermediate (WTI) for October delivery slid to $ 90.92 — a level last seen on May 2, 2013.
"Prices of oil always go up and down so I really don't know why the big fuss about it this time," AFP quoted Al-Naimi as saying.
Al-Naimi told reporters ahead of a regular meeting for oil ministers of the Gulf Cooperation Council (GCC) states in Kuwait City on Thursday that any measures the Organisation of Petroleum Exporting Countries (OPEC) needs to take regarding the price slump "should be discussed when OPEC meets" in November.
Saudi Arabia told OPEC it reduced its oil output in August by 400,000 barrels per day (bpd), a cutback coinciding with a drop in oil prices toward below $100 a barrel.
In a monthly report issued on Wednesday, the OPEC said Saudi Arabia reported August production of 9.597 million bpd, down from 10.005 million bpd in July.
Sadad Al-Husseini, a Saudi oil expert, said the Kingdom’s announcement on cutting production by 400,000 bpd was aimed at balancing the international market. “Saudi Arabia also wants to show that it was closely following the market where the demand is less than what was expected.”
He said the Kingdom based its oil production decisions on the demand and supply in the market. “Saudi Arabia prefers to see oil prices at $100 per barrel as it will not have negative impact on the international economy. We can see economic recovery all over the world except Europe,” he pointed out.
“The price changes reflect concern over the demand outlook, which is less optimistic than what was previously expected. At the same time, the political risk premium has likely diminished somewhat as some of the feared disruptions have been less than expected. In practice, however, the market dynamics do not allow for great volatility in the longer term as the marginal cost of extraction is high, in many cases necessitating prices at current or even higher levels,” a regional analyst, who wants to remain anonymous, said.
He added that this is partly reflective of general softness for commodities among concerns about the outlook for Europe and China in particular.
“Lower prices naturally mean lower fiscal receipts in the GCC in the near term. Saudi Arabia's role as the swing producer means that it will respond to slowing demand by cutting back on its output as already seems to have happened according to the most recent OPEC data,” he said.
Ole Hansen, head of commodity strategy, Saxo Bank, told Arab News: “It is widely believed that Saudi Arabia is using $85 as their current breakeven so on that basis further price reductions from current levels will not be a problem at the moment. If the reduction in price also occurs at a time of reduced production then the impact could be bigger but so far Al-Naimi has not expressed any concerns following the recent price slump and he sees the price recover back to $100 within a few months.”
He added: “The world has grown used to a global benchmark price close to $110 per barrel since 2011 but given the current slowdown in Europe, China and elsewhere, a lower price will help support the recovery. On that basis, a price closer to $100 will go a long way to help this process without bringing to much hardship on global producers both within OPEC but also North American shale oil producers, which needs a relative high price to breakeven.”
Hansen said: “From a price perspective what is also important to conclude is that the increased production from North America has helped reduce the geopolitical price spikes seen since the Libyan war in 2011 and this reduced uncertainty among consumers also go a long way to help economic growth.”
Oil prices plumbed the latest lows on Thursday after the Paris-based International Energy Agency (IEA) cut its oil demand outlook.
The IEA cut its estimate for oil demand this year to growth of one percent or to 900,000 barrels per day, from a previous estimate of 1.1 percent or one million barrels per day. That takes total demand for the year to 92.6 mbd.