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Saudi Arabia '100pc comfortable' with oil market

ABU DHABI, June 6, 2015

Saudi Arabian Oil Minister Ali Al-Naimi said he was "100 percent comfortable" with the oil market, in terms of supply and demand, reported the Saudi-owned Al-Hayat newspaper.

Naimi's remarks came ahead of an Opec meeting on Friday in which the organisation agreed to stick by its policy of unconstrained output for another six months, setting aside warnings of a second lurch lower in prices as some members such as Iran look to ramp up exports.

He told the newspaper the market was witnessing an increase in demand for oil and a slight improvement in global growth and that supply from outside of Opec member countries had declined.

"I am 100 per cent comfortable with the market situation, but prices are a different issue," he said.

Concluding a meeting with no apparent dissent on Friday, Al Naimi said Opec had rolled over its current output ceiling, renewing support for the shock market treatment it doled out late last year when Saudi Arabia, the world's top supplier, said it would no longer cut output to keep prices high.

The group will meet again on December 4, Al-Naimi said.

Asked whether it was impossible to return to the $100 per barrel price level, Naimi told the newspaper: "I tell the world, don't be preoccupied with prices as they are determined in the market and there are a lot of speculators and the market has several elements and prices change daily up and down."

On whether the market would see the $100 a barrel level again, he said: "God knows, nobody can predict that."

The oil minister explained why he was not worried about the return of Iran and Libya's crude to the market and a possible increase in the levels supplied to the market by Iraq.

"I know the oil trading sector well, today the world consumes 93 million barrels per day (bpd) and if we deduct liquids and others, the global consumption reaches 75 million bpd and the annual natural decline rate is 10 percent which means the world loses every year 7.5 million bpd so you can compensate these volumes through drilling new wells."

Naimi also defended the decision taken at Opec's last meeting in November not to cut production in the face of falling prices, saying it was built on predictions that had proven to be true.

Saudi Arabia, the world's top oil exporter, had said at the time it would no longer cut production to keep oil prices high.

Naimi also said Saudi Arabia's spare capacity was still at the level of 1.5 million bpd.

"The basic system of our production capacity is that we need if we wanted to go up to 12 or 12.5 million bpd, which is our production capacity, we need 90 days to move rigs from exploration work over to drill new wells to raise production. Its an estimation we have done in the past, but many people don't want to understand this and claim we don't have production capacity at this level and this is not true."

In answer to a question about whether the kingdom had increased the rate of its drilling lately Naimi said: "What is being said is not true, in reality the natural rate of decline in wells in Saudi is the lowest in the world, between 4 and 6 per cent."-Reuters




Tags: Saudi Arabia | oil market |

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