Global Arab Network | Saudi Arabia Calls to Sign New International Energy Forum Charter

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Saudi Arabia Calls to Sign New International Energy Forum Charter

Monday, 31 January 2011 23:17

Saudi Minister of Petroleum and Mineral Resources Ali Al-Naimi

Kingdom of Saudi Arabia Ali Al-Naimi reiterated that oil producers and consumers share a common interest in promoting the stability of oil markets announcing that the kingdom has called for a meeting next month to sign the International Energy Forum's new charter.

The minister made the remarks in a speech today at the Plenary Session of the Second Global Commodities Forum of the United Nations Conference on Trade and Development, Global Arab Network reports according to (SPA).

Oil producers and consumers share a common interest in promoting stable markets and ensuring affordable and fair prices. Petroleum is a long-term, capital-intensive industry, with exploration, discovery and development taking long lead times of many years to bring to production, the Minister said.

As such, adequate financial returns, stable prices, and transparency and predictability of future demand are needed. Wildly fluctuating prices are not conducive to future investments to ensure that crude oil, refined products and natural gas supplies are delivered when and where they are needed, Al Naimi said. Saudi Arabia has invited more than 80 ministers from around the world to come to Saudi Arabia next month to sign the International Energy Forum's new charter; this effort will take the producer-consumer relationship to yet a higher level, the minister said.

Such dialogue encourages the greater openness and understanding necessary to reduce volatility. Transparency is vital for both producers and consumers, from the considerations of reliable and timely data and their collection and exchange, he added. The Saudi Oil Minister was confident that oil markets are relatively balanced and that recent price rises have less to do with supply-demand fundamentals than with gyrations in the value of the dollar and in traders seeking to test new price levels. "There is adequate spare capacity in the system. Inventories in all key markets are ample, and there is significant spare capacity in Saudi Arabia.

The Kingdom realizes that we have an important role to play in promoting stability in world oil markets. "Our most powerful tool for achieving a balanced market is our maintenance of spare production capacity. We work very hard to make sure that the global oil market is well supplied and well balanced. "To that end, it is our ongoing policy to maintain at least 1.5 to 2 million barrels per day of spare capacity to be used whenever and wherever there is a need. Today it stands at about 4 million barrels per day.

"Maintaining this spare capacity requires considerable investment, but over the years the value of that cushion has been proven in the face of unforeseen supply disruptions, and it has helped to counter market volatility, Al-Naimi said.

It is worth noting that Iraqi production appears on pace to grow quickly over the next couple of years, as key fields benefit from new investment. These incremental supplies should also help ensure balanced markets. In addition, refining bottlenecks that existed several years ago have mostly been resolved through the addition of new capacity in key markets. In fact, the global refining capacity additions by Saudi Arabia alone are expected to approach 2 million barrels per day over the next five years or so.

However, current prices are a reflection of more than just existing fundamentals. Market expectations play a significant role in price formation. And it is clear that markets and higher oil prices are being driven by doubts and uncertainties. These include the future of non-OPEC conventional supplies, whether OPEC will make investments to significantly expand production capacity, and whether non-conventional sources, such as oil sands, can meet growing demand without passing on their higher costs to the consumer. (SPA)

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