He believes that Saudi Arabia’s strong balance sheet means that it can afford to take a longer-term view of the oil market.
“This helps to explain why oil minister, Ali al-Naimi, has so far refused to bow to pressure from smaller OPEC members to cut oil output in order to shore up prices, Tuvey said. Al-Naimi and other Saudi policymakers have consistently argued that they are not willing to keep higher-cost oil producers in business.”
He said that the Saudis clearly feel that, by pushing up oil prices now, they would simply encourage further development of unconventional sources of oil which would ultimately threaten the Kingdom’s long-term position in the oil market.
Tuvey believes that there are signs that this country’s strategy is bearing fruit.
“The number of rigs drilling for oil in the US has fallen sharply and there are tentative signs that US oil production is now starting to be scaled back. In addition, major oil companies have shelved a number of projects elsewhere in the world in recent months,” he said.
Saudi Arabia’s oil production increased to 10.308 million barrels a day in April compared to 10.294 million barrels a day, according to OPEC data.
Earlier, Saudi Arabia said its oil production is likely to remain at 10 million barrels per day, as the Asian demand for oil remains strong, and the country is ready to supply any required volume.
During a meeting, held in November 2014, the cartel decided not to change the quota, despite the falling oil prices at the time and the persuasions of some countries to cut production to stabilize prices.
The position of Saudi Arabia, which refused to cut the production, has become an obstacle for OPEC on the way to the quota reduction.
OPEC’s next meeting will be held in Vienna on June 5.
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