By Arab News
Saudi Arabia will not cut oil production and give up its market share in order to prop up prices, said the chairman of Saudi Aramco at the World Economic Forum in Davos.
“We are not going to accept to withdraw our production to make space for others,” Khalid Al-Falih said at a panel hosted by CNN’s emerging markets editor John Defterios.
Saudi Arabia is the world’s second biggest oil producer and the top crude exporter. “This is the position that we’ve earned…we are not going to leave that position to others,” Al-Falih said.
He said Saudi Arabia has in the past played the role of a “reserve bank” in the oil market, smoothing short-terms shocks. The country has acted during the financial crisis and during civil unrest and wars in oil producing regions that have disrupted supplies. But it will not step in to fix the hugely oversupplied market.
“Saudi Arabia has never advocated that it would take the sole role of balancing market against structural imbalance,” he said at the CNN panel.
“If there are short-term adjustments that need to be made and if other producers are willing to collaborate, Saudi Arabia will also be willing to collaborate,” he said.
Oil prices have crashed to $27 per barrel from well over $100 in just 18 months. “If the prices continue to be low, we will able to withstand it for a long long time … obviously we hope it will not happen,” he said.
He said the current prices are “unreasonable,” but are probably not likely to climb much any time soon. “Short term, it’s a very bleak picture,” he said.
Saudi production (now at about 10.3 mbd) would be nothing by now if the Kingdom had continuously cut production to allow room for others, he added.
Earlier this week, Foreign Minister Adel Al-Jubeir told CNN that supply and demand are governing Saudi’s oil strategy, not an attempt to hurt Iran. “People should go back to Adam Smith and basic economics. It’s about supply and demand …We let the market determine where the equilibrium should be. What we’re seeing now is the market price,” he said.
Saudi Arabia has the world’s largest spare crude oil production capacity. Saudi Aramco says it is the world’s lowest-cost producer.