Consumers plot emergency oil release as Saudi decries high prices
PARIS, March 29 — Saudi Arabian Oil Minister Ali al-Naimi mounted his most direct rhetorical attack against high oil prices yesterday, but showed no sign of moving to increase supplies even as France joined the United States and Britain in talks for a release of strategic reserves.
Two weeks after Reuters initially reported that Britain and the United States were set to agree on tapping emergency stockpiles, French Energy Minister Eric Besson said the European nation was also in talks with Washington. Le Monde reported that the move could come in a matter of weeks.
At the same time, the Financial Times published a rare opinion piece by the head of the world’s largest crude oil exporter, who said a feared shortage of oil supplies was a “myth” but reiterated that Saudi Arabia was ready, able and willing to meet any gap in supplies.
The moves emphasised the growing concern from both sides of the market — producers and consumers — about the economic and political impact of the 15 per cent jump in oil prices this year. But it also highlighted the different responses they are taking.
Any release of strategic reserves is expected to be based on the assumption that oil markets face a shortage of crude, putting Western economies directly in opposition to the opinions offered this month by top exporter Saudi Arabia.
Naimi’s comments were his bluntest yet on oil prices, which have been driven by the loss of supplies from several producers across the world and, more importantly, by the threat of a disruption from Iran.
“The bottom line is that Saudi Arabia would like to see a lower price,” he said.
“Supply is not the problem, and it has not been a problem in the recent past. There is no rational reason why oil prices are continuing to remain at these high levels.”
But in the editorial, Naimi fell short of saying that the kingdom planned to increase production. Oil markets, already trading lower on the day after news of the French talks with the United States, barely budged after his comments.
Oil markets have been gripped this year by expectations US and EU sanctions against Tehran aimed at halting the OPEC nation’s nuclear ambitions will cause a shortage in global oil market.
Global supplies are already down by more than a million barrels per day, according to a Reuters survey, due to outages in Yemen, Syria, South Sudan and the North Sea.
Rising oil prices have become a major headache for politicians around the world, including US President Barack Obama who is aiming for re-election in November and facing public anger over soaring US gasoline prices.
Earlier in March, British sources said London was prepared to cooperate with Washington on a release of strategic oil stocks that was expected within months, in a bid to prevent fuel prices from choking economic growth.
A White House official reiterated that the United States was considering a reserve release but no decisions had been made.
“As we have said repeatedly, while this is an option that remains on the table, no decisions have been made and no specific actions have been proposed,” White House spokesman Josh Earnest told reporters.
“Anybody who tries to convince you — in this government or any other government, frankly — that specific decisions have been made or actions have been proposed is not speaking accurately.”
Fuel prices in France have hit record levels, prompting an intense debate between presidential candidates, also ahead of a national election. The French budget minister and government spokeswoman, Valerie Pecresse, told journalists France had joined the United States and the UK in IEA consultations to receive authorization to draw from strategic stocks.
Oil reserve releases are normally coordinated by the International Energy Agency that represents 28 industrialised countries on energy policy.
But the head of the IEA, Maria van der Hoeven, has said on several occasions that a coordinated IEA release is not warranted because there is no significant supply disruption on world oil markets. Germany and Italy say they are opposed.
Van der Hoeven said earlier this month that countries could choose unilaterally to release stocks in consultation with the agency. The IEA declined further comment yesterday.
The Paris-based IEA has authorised only three coordinated releases since it was founded in 1974, with the last one in June 2011 in response to lost Libyan production during its civil war.
The government in Berlin said it was unaware of any official request from the United States to release emergency oil stockpiles and did not believe the current situation justified such action under German law.
The German law on oil provisions says emergency reserves can only be released in the case of “physical disruption to supplies. In our view, there is no physical shortage at the moment,” a government spokeswoman told reporters.
Saudi Arabia is the only country in the world with significant spare capacity to compensate for a major supply shortfall.
Naimi last week insisted Saudi Arabia could immediately ramp up production up to its full strength — 12.5 million barrels per day (bpd) — from 9.9 million bpd now if buyers requested more oil.
In his piece yesterday, Naimi said that the OPEC kingpin did not want rising fuel costs to undermine the economy of consumer nations. Earlier this year he identified US$100 (RM305) a barrel as an ideal price for producers and consumers, about US$25 below current world prices.
“I hope by speaking out on the issue that our intentions — and capabilities — are clear. We want to see stronger European growth and realise that reasonable crude oil prices are key to this,” he wrote, adding Saudi Arabia had a responsibility to “do what it can to mitigate prices.”
But, echoing his comments from last week, the oil minister said that it was not actual supply disruptions that were driving up prices, but political tensions and worries about potential shortages that were driving the market.
“It is the perceived potential shortage of oil keeping prices high — not the reality on the ground,” he said. “There is no lack of supply. There is no demand which cannot be met.” — Reuters
Saudi Arabian Oil Minister Ali al-Naimi (centre) talks to journalist during an OPEC meeting in Vienna on December 14, 2011. — Reuters pic