Saudi Arabia is committed to stability of oil supply and avoiding shortages, Oil Minister Ali Al Naimi said on Friday.
“The whole idea is that there will not be any shortages in the oil market,” he told reporters. “That has been Saudi Arabia’s policy all along, to manage stability of the oil market, keeping it in balance.”
He was speaking a day after the Organisation of the Petroleum Exporting Countries, or Opec, agreed to adhere to its 30 million barrels per day output ceiling, saying it will roll back production of 1.6 million barrels per day over that.
Opec members will also reduce the group’s output to adhere to its 30 million barrels per day output ceiling and the effects should be seen in July, Opec secretary-general Abdullah El Badri told a news briefing on Friday.
The Opec agreed at a meeting in Vienna on Thursday to maintain the 30 million bpd production ceiling. El Badri said that would entail curbing actual supplies by 1.6 million bpd.
“We overproduced by 1.6 [million barrels per day], now we decide to take out the 1.6 and stay with the 30 million,” he said. “Everybody will respect that.”
“Maybe this will start some time in July. You need some time,” he added. The Opec did not issue individual member quotas as part of the 30 million bpd production agreement, which it adopted at its last meeting in December.
But El Badri said group members, except for Iraq and Libya, had their own individual output allocations based on the group’s November 2011 production, which were agreed at the December meeting last year. “It is not a quota,” he said. “The most important thing for me is the 30 million bpd,” he added.
Saudi Arabia, Opec’s top producer, says it will comply with the new agreement, but stopped short of saying that it would reduce supply. Riyadh has been pumping around 10 million bpd — a 30-year high — for several months running.
$110 not a threat
El Badri also said that oil prices at $110 a barrel do not pose any risk to the world economy.
“Oil prices until $110 are not a threat to world economic growth,” El Badri said.
Kuwaiti Oil Minister Hani Abdulaziz Hussain said when asked if his country would be reducing output that “there is no talk of any particular country” cutting. The group’s agreement is a collective one, he said, adding that “it’s more of a wait and see.”
“Oil is following the improving euro. The market has been very short on fears of an economic collapse,” said Thorbjoern Bak Jensen, an analyst at A/S Global Risk Management.
“But now people think the moderates will win in Greece and are comforted that the central banks will step in.”
“The unchanged Opec output is reflected in the narrowing WTI/Brent spread,” said Carsten Fritsch, an oil analyst at Commerzbank.
“The European market is oversupplied while WTI is affected by this week’s US inventory news, showing a good possibility for a ramp-up in refining, and the effects of the Seaway pipeline will start to become more visible,” Fritsch added.
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