Saudi Arabia, UK agree on need to stabilize oil market

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Apr. 6 -- Saudi Arabia’s Minister of Petroleum and Mineral Resources Ali I. Al-Naimi and the United Kingdom’s Energy and Climate Change Sec. Chris Huhne took aim at speculation in oil markets during a meeting in Riyadh.

The official Saudi Press Agency (SPA) reported that cooperation between consuming and exporting countries is important “to stabilize the market, avoid extreme price fluctuations, and decrease the volume of misinformation and exaggerated expectations,” all of which harm petroleum markets.

“Al-Naimi and myself shared common views that there is no shortage of supply and hence there is no reason behind the soaring oil prices, which hover around $115-120/bbl today,” said Huhne following his meeting with Al-Naimi.

Huhne said Al-Naimi is “very committed on providing stability to the oil market.” He said, “To have a very volatile oil market impacts growth. There is a very strong common interest between Saudi Arabia and consumers.”

The meeting between Al-Naimi and Huhne came as Brent crude prices on Apr. 5 fell slightly below a record high of $121/bbl that was reached on Apr. 4—still below the nominal high of $147/bbl in June 2008.

But the 17% fall of sterling against the dollar over the past 2 years has raised the sterling price to £74.60/bbl, which is actually higher than the record set in 2008.

The effects are evident in the UK where wholesale prices have gone up significantly since the start of the year and also since the price rises last autumn, according to an executive at one of Britain’s big six utilities.

“UK wholesale gas prices are up about 25% since January and about 30% since the last round of price rises in November. The trend is pretty clear,” the executive said.

Crude prices have soared above $100/bbl since the beginning of the year as civil unrest has toppled governments across the oil-producing countries of the Middle East and North Africa.

During that time, Saudi Arabia has repeatedly increased production to make up for the loss of supplies from Libya. But those efforts have not been enough to stem the rising price of oil.

Traders are more concerned about the possible loss of supplies from Saudi Arabia itself, which faces a degree of unrest especially from members of the Shi’ite community in the kingdom’s eastern region.

Fears of rocketing oil prices were stoked when former Saudi oil minister Sheikh Yamani told a conference Apr. 5 that serious unrest in his homeland could push oil prices as high as $300/bbl.

“If something happens in Saudi Arabia it will go to $200-300[/bbl]. I don't expect this for the time being, but who would have expected Tunisia?” said Yamani at a conference at the London-based Center for Global Energy Studies (OGJ Online, Apr. 5, 2011).

Even efforts by Saudi Arabia’s King Abdullah, who recently boosted domestic spending, have not been sufficient to allay the concerns of traders. In fact, traders see the King’s efforts as a sign of even greater problems.

King Abdullah announced $93 billion in social handouts in March, the second benefits package to be unveiled within a month, as part of his government's efforts to stave off the kind of unrest that has gripped neighboring Bahrain, Yemen, and Oman.

“The king’s largesse tells you the risk is not nil. It is not 0.1%. The king’s largesse tells you the risk is real—probably around 5%,” a senior executive at one of the world’s largest oil trading houses told the Financial Times earlier this week.

The US government, signaling its own concerns, sent US Sec. of Defense Robert Gates to Saudi Arabia Apr. 6 to discuss unrest sweeping the region with the Saudi king.

"We are going to continue to make sure that our partners understand we're not abandoning them,” said a senior defense official travelling with Gates. "It's important for us to work closely and to share views with our partners in the region, so we're looking for the king's perspective."

Meanwhile, Prince Khaled bin Sultan, Saudi Arabia’s assistant minister of defense and aviation, urged his country’s armed forces to prepare for all eventualities against the backdrop of developments in the region.

“Saudi Arabia is not like other countries,” he said. “It’s home to the two holy mosques and is abundant with natural resources that ensure world economic security.”

Contact Eric Watkins at hippalus@yahoo.com.

Related Articles

TAEP: TPI still peaking, but ‘contraction unavoidable’ as oil prices fall

12/12/2014 The Texas Petro Index (TPI), a composite index based on a comprehensive group of upstream economic indicators released by the Texas Alliance of Ene...

MARKET WATCH: NYMEX crude oil price extends slump

12/12/2014 Crude oil prices extended their slump on the New York market with a Dec. 11 settlement of less than $60/bbl for January, and prices continued downw...

US needs more data before ending crude export ban, House panel told

12/11/2014 Much more environmental impact information is needed before the US can reasonably remove crude oil export limits, a witness told a House Energy and...

Rosneft, Essar sign terms of oil supply agreement

12/11/2014 OAO Rosneft and Essar Energy PLC have signed key terms of an oil supply agreement in New Delhi. Rosneft said shipments to India may begin in 2015.

Barton introduces bill to remove US crude export limits

12/11/2014

US Rep. Joe Barton (R-Tex.) introduced legislation that would remove US crude oil export limits that have been in place for nearly 40 years.

MARKET WATCH: NYMEX crude oil price slides below $61/bbl

12/11/2014 Crude oil prices fell below $61/bbl for January delivery on the New York market Dec. 10 after the Organization of Petroleum Exporting Countries low...

MARKET WATCH: US crude oil prices rebound modestly awaiting inventory report

12/10/2014 Crude oil prices rose modestly on the New York market Dec. 9 while analysts awaited the US government weekly inventory report on crude oil and prod...

ExxonMobil forecasts 35% higher world energy demand by 2040

12/10/2014 A significantly bigger global middle class, expanded emerging economies, and 2 billion more people will contribute to 35% higher world energy deman...

MARKET WATCH: Crude oil prices briefly dip to 5-year lows

12/09/2014 Oil prices on the New York and London markets remained volatile, briefly trading around lows not seen since 2009 although prices were attempting to...

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected