Oil at $50-60 ensures adequate supply: Saudi

Bloomberg & Reuters

Officials from Saudi Arabia and Kuwait, key protagonists in shaping OPEC policy, said oil at $50 to $60 a barrel would ensure adequate global supply, setting out a potential price band for the producer club before its meeting in Vienna next month.
“A $50, $60 oil price — absent a supply accident — is sufficient to develop the low-cost resources to provide increases that will be necessary over the next three to four years,” Andrew Gould, board director at state-owned giant Saudi Arabian Oil Co., said Tuesday in London.
His comments, at the annual Oil & Money conference in London, suggest Riyadh sees relatively little upside to prices in the short term. While benchmark Brent crude is up about 13 percent since the Organization of Petroleum Exporting Countries reached a deal Sept. 28 to manage supply, it’s still trading at half its level of mid-2014, at around $52 a barrel.
Projections for $50 to $60 oil over the next 15 months are “logical” and “acceptable,” Kuwait’s acting Oil Minister Anas Al-Saleh said in a report from the state-run Kuwait News Agency. “Unless there are new developments in the major oil-producing countries, this scenario will be most likely,” he said.
Saudi Arabia and Kuwait were among oil producers to hold output at or near all-time highs in September as OPEC continued to defend market share against rival suppliers including the U.S. While many high-cost shale wells were shut in after oil’s collapse, some North American drillers are starting to bring back rigs.
A sustained rally will depend on OPEC’s ability to agree on individual quotas when it meets on Nov. 30. Should the group succeed, a further price increase is likely to spur shale output, according to Fatih Birol, executive director of the International Energy Agency, who said he agrees that $50 to $60 is enough to meet short-term supply needs until 2020.
“This upward pressure on the prices would stimulate some high-cost producers to increase their
production such as the U.S. shale
oil,” Birol said Tuesday before
the conference. “The price level around $60 would give a strong
impetus to the bulk of the current US shale industry.”
Others are looking for a higher price to proceed with longer-term projects. Hess Corp. Chief Executive Officer John Hess said Tuesday that low prices have been “devastating” and producers need $60 to $80 a barrel for “long-cycle” developments. A price of $50 would hold shale production flat, he said at the conference.

August output falls
Saudi Arabia’s crude oil exports in August fell to 7.305 million barrels per day from 7.622 million bpd in July as the world’s largest oil exporter pumped less, the kingdom has told an influential data base.
Monthly export figures are provided by Riyadh and other members of the Organization of the Petroleum Exporting Countries (OPEC) to the Joint Organizations Data Initiative (JODI), which published them on its website on Tuesday.
After the kingdom pumped a record high 10.673 million bpd in July due to summer demand and requests from customers, its August output dropped to 10.630 million bpd. Crude oil used to generate power rose 42,000 barrels per day in August to 739,000 barrels per day.
Saudi Arabia’s oil inventories peaked last October at a record high 329.430 million barrels but have declined to meet domestic demand without affecting exports.
Its domestic crude inventories totalled 281.01 million barrels, down from 281.463 million barrels in July, data provided by JODI showed.
Domestic refineries processed 2.600 million bpd of crude in August, down from 2.611 million in July. Exports of refined oil products in August inched higher to 1.370 million bpd from 1.367 million bpd in July.
State oil firm Saudi Aramco has stakes in more than 5 million bpd of refining capacity at home and abroad, placing it among the global leaders in making oil products. OPEC on Sept. 28 agreed to reduce output to a range of 32.50 million barrels per day to 33.0 million bpd, its first output cut since the 2008 financial crisis.