Saudi Arabia gave the strongest indication yet it’s trying to stop oil prices from rising, saying that OPEC and allies are in a “produce as much you can mode” to meet demand and replace any looming shortages.
The kingdom has already boosted oil production to 10.7 million barrels a day, near an all-time high, and it can increase it even more to help plug any supply shortfalls due to US sanctions against Iran’s energy industry, Saudi Energy Minister Khalid Al-Falih told a conference in Riyadh.
US President Donald Trump is counting on Saudi cooperation to soften potential price increases from the sanctions that take effect next month.
“We will meet any demand that materializes,” Al-Falih said at the country’s signature investment conference, which is being overshadowed by an international outcry over the killing of Saudi government critic Jamal Khashoggi.
Brent crude, the global benchmark, has dropped almost 10 percent from a four-year high of $86.29 a barrel on October 3 as Saudi Arabia and Russia promised extra supplies and US stockpiles climbed.
Saudi Arabia’s energy minister has used public comments over the past week to tone down the kingdom’s veiled threat to use oil as a political weapon to retaliate against possible sanctions related to the Khashoggi killing. The reassurances seem to have worked, with oil markets more focused on American crude stockpiles than the potential fraying of the US-Saudi relationship.
The Riyadh conference is aimed to generate investments in the country as part of a broad economic transformation plan to wean it off reliance on oil.
Al-Falih said plans to diversify the economy will continue, but oil and gas expansion will also remain a priority. In addition to its crude investments, Saudi Arabia intends to partner in liquefied natural gas projects abroad and start trading LNG in the future. Global gas consumption is growing, he said, and oil demand will reach 120 million barrels a day in 30 years, from 100 million currently.
In an effort to maintain stable supplies to the crude market, Al-Falih said he hopes the Organization of Petroleum Exporting Countries and its non-OPEC oil partners will sign an “open-ended” agreement in December. The group, sometimes known as OPEC+, agreed in late 2016 to cut production to eliminate a supply glut and has since intervened to coordinate output and balance the market.
OPEC still hasn’t revived output to what it was producing prior to the 2017 cuts. The 13 nations who’ve been members of the group throughout the period pumped 32.4 million barrels a day last month, about 740,000 barrels a day less than the level in December 2016, according to data compiled by Bloomberg.
The Saudi oil chief lauded the achievements of the group, saying that it has stabilized the market and helped the energy industry to recover.
“Significant investment flows” have returned to the oil and gas industry that will bring on new supplies to help replace losses in areas such as the North Sea and in some OPEC countries, he said. Even still, the outlook for next year is “very unpredictable” in terms of both supply and demand, Al-Falih said.
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