The Saudis continue to insist that there was no political motive behind their decision not to cut oil production at the November 2014 OPEC meeting, a decision that sent prices crashing.
In the days and weeks that followed that historic meeting, many speculated that the decision was intended by the Gulf oil players to put pressure on everyone from Russia to Iran to the US.
Ibrahim Al-Muhanna, an adviser to the Saudi Minister of Petroleum gave a speech on Sunday in Doha, reiterating oil minister Ali al-Naimi’s comments a few weeks ago: the decision not to cut production wasn’t about political motives. His words:
Soon after the OPEC meeting, various theories were put forward about OPEC’s and Saudi Arabia’s intentions. The conspiracy theory shifted completely. From being against Russia and/or Iran, to being all about hurting US shale oil production. And others said OPEC was dead! It was like staring into a mirage. It was all nonsense but it does have an impact on the direction of the oil price, at least for a couple of weeks.
Instead, he said, the decision not to cut production was taken because non-OPEC producers (specifically, Russia and Mexico) wouldn’t agree to cut in a meeting the day before the official OPEC meeting last November.
“Neither non-OPEC producer was prepared to cut. They have their own reasons. So OPEC took a bold decision. In the current circumstances, it could not act alone. It agreed to keep the same production level and to let the market balance itself,” he said.
Further, Al-Muhanna said he didn’t think the fundamentals in the market warranted the price to go as low as it did, and prices are likely to stabilise where they have been in recent weeks, around $US60 a barrel.
“It’s my view that optimistic and positive people are more right than wrong. I’m confident that demand is, and will be, stronger. I’m also confident that supplies will be just sufficient to meet demand and that prices will firm up,” he said.
However, while the price of brent crude was back up above $US60 a barrel, it has been falling since the beginning of March. On Monday morning it was trading below $US53 a barrel.