In a press conference today, Minister of Petroleum and Mineral Resources Ali Bin Ibrahim Al-Naimi attested to a balance in the current situation of supply and demand for crude oil in the international market. Production, he said, was increased by the Oil Producing and Exporting Countries (OPEC) in March and again in June, by a total of over 2.4 million barrels a day. Together with increases by Norway and Mexico, the oil supply during the third quarter of 2000 will be 1.0 mbd higher than in the second quarter, and 3 mbd higher than at the beginning of the year.
He attributed the fact that prices continue to remain high to many factors, in particular the effect of the perceptions of buyers and speculators. Moreover, he said, inventories of commercial crude oil and its products are still low as compared with one year ago. Shortage in stocks of reformulated gasoline and apprehension about market scarcity, notably in the United States, have led to higher prices at the pump, and this has caused increases in crude oil prices, especially for the low sulfur grades.
Minister Al-Naimi reiterated that excessive increase or decrease in prices is not in the best interest of either the producing countries or the oil industry in general. One of the most salient disadvantages of prices above a reasonable level is the potential development of alternative or competing energy sources that would undermine petroleum's importance. Another disadvantage of higher prices would be to encourage exploration for oil in non-OPEC countries, which in turn would lead to an increase in supply and a downward pressure on prices. A third disadvantage, he declared, is that high oil prices always have a negative impact on the global economy, weakening demand in the long run and causing producing countries to lose their credibility; this adverse effect impacts particularly on developing countries with weak economies.
In response to a question why oil producers are not taking action to stop price hikes, he said that as far as OPEC is concerned, real steps have been taken to control prices, and even some non-OPEC producers share this view. Asked what steps the Kingdom has taken to confront the fears of limited production and partial disruption of supplies in one of the producing counties, he said that based on its production figures, the Kingdom has a surplus production capacity of about 2.3 mbd. Saudi Arabia always maintains an additional production capacity ranging from 1 to 3 mbd, he explained, and this surplus is designed to supply the market in case of sudden disruption and to meet any increase in demand from consuming nations.