Slide in Oil Prices ‘is Temporary’
RIYADH: The slide in oil prices is only temporary as global oil demand is expected to grow annually by up to 1 million barrels per day (bpd) while world consumption is likely to increase to 105 million bpd in 2025, an adviser to Saudi Arabia’s oil minister said.
“The current decline in oil prices and demand is a temporary, unnatural situation,” said Ibrahim Al-Muhanna at an energy conference in Riyadh.
“The expectation is for continued growth in demand for the various types of energy, including oil. At a minimum, oil demand is expected to grow annually by up to 1 million bpd and world consumption is expected to increase to about 105 million bpd in 2025, even when taking into consideration all the energy rationalization policies in countries all over the globe,” he said.
He added: “Saudi Arabia considers shale oil an important addition to global supplies. They help guarantee market stability and will help meet increasing future energy demand.”
Ibrahim Al-Muhanna added: “Aside from the talk of conspiracy or the secret oil struggle, last October there was widespread talk of a price war between oil companies in Gulf countries, specifically, Saudi Arabia, Kuwait, Iraq and Iran in the Asian market.
“This was after Saudi Aramco reduced its Asian Region sales prices as a regular routine procedure. This allegation spread all over the world, including some Arab media, and undoubtedly affected the acceleration of the price decline.
“The allegation indicates a deficiency in understanding and, just like the conspiracy mindset, will soon abate and be proved wrong.
“Saudi Aramco is a leader in this pricing process, both on the Gulf and global levels.
On the 5th of every month, Saudi Aramco informs its customers who are refining companies of its pricing methodology for the following month, for the five crude oil types it produces, in its three areas of exports: Asia, Europe and the US.
“Once Saudi Aramco has issued its price differentials, oil companies in the region issue their prices based on Aramcoís formula, and the crudes they produce take into account their freight differentials and cost and the relation with customers.
“It is difficult to imagine a price war between the Gulf region oil companies because it is unpractical and harms the states and producing companies,” said the adviser.