Saudi minister: Arab states should step up cooperation over energy

Saudi Arabia's Oil Minister Ali al-Naimi attend a ministerial conference in Riyadh. (File photo: Reuters)

Saudi Arabia's petroleum minister on Thursday called for “joint action” among fellow Arab energy producers to increase trade, investments and partnerships, amid a period of uncertainty over low oil prices and fears of global oversupply.

“The challenge which we are facing in the Arab world is representing our need for more joint action in the field of the oil and energy, and try to have more trade partnerships in between the states,” the kingdom's energy minister Ali al-Naimi said at conference on Bahrain on Thursday.

The cost of new oil and energy projects around the region requires “huge” capital, which can obtained by the issuance of bonds from regional financial institutions, and by both regional and global development funds, he added.

The challenge which we are facing in the Arab world is representing our need for more joint action in the field of the oil and energy, and try to have more trade partnerships in between the states.

Saudi Energy Minister Ali al-Naimi

 

This in turn would “preserve the positive role of oil” in the Arab world, Naimi said.

The oil minister said that despite the global economic slowdown, he expected demand to continue increasing year-on-year.

Meanwhile, Bahrain's energy minister hinted at the conference that Iran's projected increases in oil exports - pending the removal of sanctions sometime next year - would not have a significant impact on prices.

“At the same time, the demand for oil in the future will rise and some of the non-conventional producers may get out of the market, because it may not be viable for them if the price drops below a certain level,” said Abdul Ali Mirza.

“Some people say that there will be more balance in the market [in the future],” he added.

New lows

Oil prices have hit lows not seen in over half a decade, as members of the OPEC cartel show no sign of cutting output. The low prices have led to fears of a supply glut, as the U.S. and several other countries continual building stockpiles.

The Gulf kingdom, which is the world’s largest exporter of crude oil, needs a price of around $100 a barrel to balance its budget – far above the current value, which hovers around $40.

The oil minister said that despite the global economic slowdown, Saudi Arabia expected demand to continue increasing year-on-year. (Paul Crompton/Al Arabiya News)

The oil minister said that despite the global economic slowdown, Saudi Arabia expected demand to continue increasing year-on-year. (Paul Crompton/Al Arabiya News)

However, with its large cash reserves, Saudi is considered to be in a better position than many of its rivals, including Iran, to weather a prolonged period of low prices.

Oil currently accounts for over 80 percent of Saudi state revenues. The IMF estimates that the kingdom will incur a deficit amounting to 20 percent of GDP this year.

While Saudi has not yet said it will tighten its 2016 budget, which is set to be rolled out in late December, its neighbor Qatar -which is one of the world's largest exporters of natural gas - has made a nod towards sweeping future reforms.

In an unusually strong address earlier this month, Qatar's Emir told citizens that the government can no longer “provide for everything.” He added that next year's budget would be focused on “efficiency” and diversification beyond the energy sector.

Measures undertaken by the UAE include a cutting of fuel subsidies in August.

Bahrain, meanwhile, has cut subsidies on meat in order to close a predicted looming budget deficit.

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Last Update: Wednesday, 20 May 2020 KSA 09:49 - GMT 06:49
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