Oil price wobbles ahead of energy giants' meet

Oil price wobbles ahead of energy giants' meet
3 min read
10 October, 2016
Hopes from some oil producers that the price of crude could increase following an OPEC agreement look short lived, as two oil giants decline to attend an energy conference.
Falih looks set to embark Saudi Arabia on a new path on oil production [Anadolu]

Saudi Arabia believes that oil prices could rise to $60 a barrel by the end of the year with crude mostly below the $50 mark since the start of 2015.

There are high expectations for oil producers with a meeting between OPEC and non-OPEC members at the World Energy Congress in Istanbul this week.

Saudi Energy Minister Khalid al-Falih said that even if this price rises, this would not affect Saudi Arabia from implementing its reform vision to transform the structure of its crude-based economy by 2030.

US oil rose above $50 a barrel in New York last week for the first time since June, but fell on Monday amid serious concerns about the viability of an OPEC plan to cut production.

Iran and Iraq will not be attending the meeting while Russia is also said to be expressing reservations.

"A meeting between OPEC and non-OPEC producers (namely Russia) will add to oil headlines this week. Don't expect a firm agreement from Russia, but headlines about cooperation are likely," Morgan Stanley told Reuters.

Saudi Arabia and oil producers agreed last month to a surprise output cut of oil cartel OPEC - the first in eight years - but many believe the reduction does not go far enough to seriously deal with the global oil glut. Riyadh too appears to be getting cold feet about the plan.

"We are seeing the convergence of supply and demand," said Saudi Arabia's energy minister, "it is not unthinkable we could see $60 (a barrel) by the year end". 

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"But my eyes are not on the price but on supply and demand... OPEC should make sure not to crimp too tightly and create a shock to the market. We do not want to shock the markets into a process that could be harmful."

Falih said that Saudi Arabia had become "a little fat around the belly, a bit complacent" during the era of high oil prices.

Now Riyadh would press ahead with the new economic vision as part of Deputy Crown Prince Mohammad bin Salman's reforms.

"The kingdom will be prepared to deal with whatever price emerges," he said.

The minister said he believed that demand for oil would peak but "if it does happen we will be ready for it".

"The (2030) vision will lead to a stronger and more robust Saudi Arabia.

This includes the planned IPO of a portion of state oil giant Saudi Aramco, the biggest such offering in history.

The World Energy Congress is an important meeting for major players in the energy sector.

The meeting will be held in Istanbul and attended by Turkish President Recep Tayyip Erdogan, Russian President Vladimir Putin and Venezuelan's Nicolas Maduro.