Petroleum and Mineral Resources Minister Ali Al-Naimi

JEDDAH: Saudi Arabia is prepared to increase its oil output and claim a bigger market share to meet the demands of any new customers, the A-Hayat newspaper quoted Petroleum and Mineral Resources Minister Ali Al-Naimi as saying.

Asked if Saudi Arabia wanted to maintain a market share of 9.7 million barrels per day, the minister told the newspaper: “Yes, unless a new client comes along and then we may increase it.”

The remark was one of the strongest signals yet that Saudi Arabia has no intention of cutting output in the face of sliding oil prices, and is instead willing to use its low cost of production to win market share from non-OPEC competitors which it blames for the price collapse.

At an Arab oil producers’ conference in Abu Dhabi on Sunday, Al-Naimi said Saudi Arabia would not cut output to prop up oil markets even if non-OPEC nations did so, and that the best way to address conditions in the oil market was to “let the most efficient producers produce.”

In the interview published on Monday, Al-Naimi said: “Based on the analysis we have done, we will not cut output at OPEC.”

He also denied media reports that he had debated oil policy with his Russian counterpart Alexander Novak at a meeting on the sidelines of the late November OPEC conference in Vienna.

He recalled that the head of Russian state oil firm Rosneft Igor Sechin had spoken for 30 minutes on the oil industry in his country and concluded by saying: “We cannot cut anything because our wells are old and if we reduced their output they will not produce again.”

Al-Naimi said he ended the meeting when Novak confirmed that his country was not willing to cut output.

“I did not ask him any question and I don’t know who reported this talk,” Al-Hayat quoted Al-Naimi as saying.

The minister also dismissed the idea that lower oil prices could result in a Saudi budget deficit this year, saying the Kingdom currently had no debt and was ready to borrow if necessary.

“The banks are loaded and we can borrow from them while maintaining cash reserves,” he said.

Asked if Gulf oil producers were in a position to put up with the lower oil prices for two or three years if necessary, he said they could.

OPEC met on Nov. 27 and declined to cut production despite a slide in prices, marking a shift in strategy toward defending market share rather than supporting prices.

‘Crooked logic’

In a separate interview with the Middle East Economic Survey (MEES), Al-Naimi said that Saudi Arabia convinced its fellow OPEC members that it is not in the group’s interest to cut oil output however far prices may fall.

“As a policy for OPEC, and I convinced OPEC of this, even Al-Badri (the OPEC Secretary General) is now convinced, it is not in the interest of OPEC producers to cut their production, whatever the price is,” Al-Naimi was quoted by MEES as saying.

“Whether it goes down to $20, $40, $50, $60, it is irrelevant,” he said.

He said that we “may not” see oil back at $100 a barrel, formerly Saudi Arabia’s preferred level for prices, again.

The kingdom pumps about 9.6 million barrels per day but Naimi said it is “crooked logic” to expect his country to cut and then lose business to other major producers outside OPEC.

The increasingly competitive global oil market has seen daily United States oil output rise by more than 40 percent since 2006, but at a production cost which can be three or four times that of extracting Middle Eastern oil.

“Is it reasonable for a highly efficient producer to reduce output, while the producer of poor efficiency continues to produce?” Naimi asked during the interview conducted with MEES on Sunday.

“If I reduce, what happens to my market share? The price will go up and the Russians, the Brazilians, US shale oil producers will take my share.”

He added it is “unfair” for the cartel to reduce output because it is not the world’s major oil producer.

“We produce less than 40 percent of global output. We are the most efficient producer. It is unbelievable after the analysis we carried out for us to cut,” he told MEES.

In Asian trade on Tuesday prices nudged higher on hopes of improved economic figures from the United States.

US benchmark West Texas Intermediate crude for February delivery gained 64 cents to $55.90 while Brent crude for February was up 33 cents to $60.44 in afternoon trade.

Prices were above $100 a barrel earlier this year.

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