Saudi oil minister denies crude price war

Saudi Arabia's Oil Minister Ali al-Naimi talks to journalists before a meeting of OPEC oil ministers in Vienna on June 11, 2014. -- PHOTO: REUTERS
Saudi Arabia's Oil Minister Ali al-Naimi talks to journalists before a meeting of OPEC oil ministers in Vienna on June 11, 2014. -- PHOTO: REUTERS

MEXICO CITY (AFP) - Saudi Arabia's oil minister on Wednesday rejected talk that the country was leading a price war in global oil markets as crude prices continue to sink.

"Talk of a price war is a sign of misunderstanding - deliberate or otherwise - and has no basis in reality," Ali Al-Naimi told a conference in Acapulco, according to the text of his speech.

Naimi called recent talk of a change in the country's strategy, in particular its cutting prices of Saudi oil to the US market, "a great deal of wild and inaccurate conjecture." "Saudi oil policy has remained constant for the past few decades, and it has not changed today," he said.

"We do not seek to politicise oil, nor do we collude against anybody. For us, it is a question of supply and demand. It is purely business."

Last week, Riyadh sent global oil prices tumbling when it cut its prices for crude for the US market while raising them for Asia, the country's major outlet.

Analysts guessed that the country wanted to strengthen its market share in the United States against a flood of domestic oil from shale deposits.

Some speculated as well that the Saudis aimed to drive down the price of crude to a point where shale production was not economically viable, forcing US producers to curb output.

The US shale oil boom has driven domestic production to record levels, nearly matching Saudi output and reducing the Middle East oil giant's longstanding power as the global swing producer which can determine the direction of crude prices.

Combined with slower growth in the global economy, the surge in US output especially has contributed to an oil glut and a plunge in prices, hitting hard the incomes of oil exporters.

The price for benchmark Brent crude has sunk from over US$112 a barrel in June to below US$83 Tuesday.

Markets were clearly not convinced on Wednesday, with Brent falling further to below the US$82 line. US benchmark West Texas Intermediate meanwhile fell 0.8 per cent to US$77.30 a barrel, compared to the June high of US$103.66.

Naimi stressed the need for a continued dialogue between the Saudi-led Opec cartel, which produces about one-third of the world's crude, and other producers as well as consumers.

"We want stable oil markets and steady prices, because this is good for producers, consumers and investors, and also helps long-term global economic growth, especially developing nations," he said.