By Barbara Lewis
Price now being driven by economic growth; markets ignoring high levels of inventory.
Saudi Oil Minister Ali al-Naimi said on Wednesday he was completely happy with the oil price, which was driven by economic growth and was ignoring high levels of inventory as part of a fundamental shift in the market.Oil prices rose to above $72 a barrel on Wednesday after Naimi's comments.
"Yes, yes absolutely," Naimi said when asked whether economic growth was driving the price.
"Just look at the charts. Don't you see all the stimulus spending? It's not going to run out, there is going to be growth and there is going to be spending."
He said high inventories for now were "irrelevant" to the oil price.
"You guys must realise that there is a fundamental change in the market. Economic growth is the name of the game, that's what's going to drive the price. As long as economic growth is there, the price is going to go up," he told reporters.
As a major supplier of oil to customers world-wide, Naimi is in a powerful position to assess the health of the oil market as an indicator of economic strength.
"We have capacity of 12.5 million bpd, and are producing about 8 million bpd. We have a little bit more feel about what is happening in the market."
In particular, he was seeing higher demand from Asia, he said.
Ahead of an OPEC meeting on Wednesday, Saudi and other OPEC ministers have said they would keep current output levels in place.
Naimi said he was "completely content" with the market and oil price.
"We are happy where it is, and it's going to be there for a while," he said further, although he did not expect a re-run of the rally to above $140 in July last year.
"It's not going to go to there again," he said, although he said Saudi Arabia had the spare capacity to calm a rising oil market if necessary.
Traditionally, OPEC has said inventories amounting to around 52-53 days of forward cover were appropriate, but Naimi said that level now would be "too tight" given the shift in the market.
Inventory levels have risen to the equivalent of nearly 62 days of forward cover, according to figures from the International Energy Agency.
Stocks have swollen as OPEC compliance has slipped with its existing curbs of 4.2 million barrels per day from last September and also as non-OPEC production has risen.
Output from the biggest non-OPEC producer Russia reached a record of nearly 10 million barrels per day in August, although, after years of under-investment, analysts have questioned whether Russia can sustain such levels.
OPEC called on non-OPEC suppliers to join in its efforts to limit output when it was struggling to boost the oil price.
They did not respond and the non-OPEC nations, who previously have attended as observers, were not invited to Wednesday's OPEC meeting.
Naimi said he did not care about non-OPEC.
Asked by reporters whether he minded that they had benefited from OPEC output cuts, Naimi said no.
"Fine, good, let people benefit, why not? We are benefiting, let other people benefit. I don't care. We can export a lot more, but we don't want to," he said. (Reuters)