Saudi minister urges joint efforts to deal with downturn of oil prices

The world's oil demand remains strong and oil producers should work together to deal with the painful downturn of oil prices, which have kept fluctuating since 2014, a minister of a Middle East oil producing country urged here Tuesday.

"This business is cyclical. We are in a painful downturn, but the market will rebalance and demand will pick up. I remain optimistic," said Ali Al-Naimi, Saudi minister of petroleum and mineral resources, at the second day of the IHS CERAWeek energy conference.

"We must continue to work together and ...stick together if we want to achieve our common goal of supplying energy for the betterment of the world and humankind," he noted.

According to the minister, the oil business and this commodity, like all commodities, is inevitably cyclical. Demand rises and falls. Supply rises and falls. And so do prices.

Al-Naimi voiced his optimism over the world's oil demand, saying it was, and remains, strong.

"You can argue over small percentage falls or rises, but the bottom line is that the world demands, and gets, more than 90m barrels per day of oil. Long-term, this will increase. So I have no concerns about demand, and that's why I welcome new, additional supplies, including shale oil," he said.

As for Saudi Arabia's position towards the challenging oil market, Al-Naimi said his country has not declared war on shale or on production from any given country or company. What his country is doing is to respond to challenging market conditions and seek the best possible outcome in a highly competitive environment.

In his view, efficient markets will determine where on the cost curve the marginal barrel resides. These supplies may be needed quickly once markets balance and tighten.

"The producers of those high-cost barrels must find a way to lower their costs, borrow cash or liquidate. It sounds harsh, and unfortunately it is, but it is the most efficient way to rebalance markets. Cutting low-cost production to subsidize higher cost supplies only delays an inevitable reckoning," he said.

"Anything we can do to make downward cycles shorter and less extreme is beneficial. This includes seeking to allow markets to work with a minimum of meddling. We are hopeful that the nimbleness and responsiveness demonstrated by shale oil producers will continue."

The minister made it clear that Saudi Arabia remains committed to meeting the demands of their customers, invest vast sums to retain their vital spare capacity to help meet additional demand or address global supply disruptions should the need arise.

"We seek stable oil markets. As such, we continue to communicate with all major producers in an effort to lessen volatility. We seek consensus and remain open to cooperative action, And lastly, we remain committed to supplying a large portion of the world's energy demands on purely commercial terms," he said.

IHS CERAWeek is recognized as a leading forum offering insight into the energy future.

Chaired by Daniel Yergin, IHS CERAWeek 2016, which has the theme of Energy Transition: Strategies for a New World, marks the 35th anniversary of the event and has drawn more than 2,800 delegates from more than 50 countries and regions.

During the five-day event, over 300 speakers are scheduled to provide fresh insights and critically important dialogue on the most urgent issues and realities to be faced in energy markets, technologies and geopolitics. Enditem