Maintaining production is ‘prudent, smart and shrewd’
Oil at $100 a barrel? Never again, says Prince Alwaleed.
A well-known Saudi prince is making a big call on oil, saying that the $100-a-barrel threshold will never be topped again.
“If supply stays where it is, and demand remains weak, you better believe [the price of oil] is gonna go down more. But if some supply is taken off the market, and there is some growth in demand, prices may go up. But I’m sure we’re never going to see $100 anymore,” said Prince Alwaleed bin Talal, the billionaire Saudi businessman, in an interview with Maria Bartiromo of Fox Business Network published in USA Today.
Alwaleed reiterated those remarks in an t.v. interview with CNBC on Friday, adding that, he sees crude-oil prices under pressure for the “foreseeable future.”
“I said a year ago [that] the price of oil above $100 is artificial,” Alwaleed said. “It isn’t correct.”
Oil has tumbled more than 56% from its June 2014 high of around $107 a barrel, with Nymex WTI futures US:CLG5 on Monday trading below $47 a barrel for the first time in nearly six years. Also see: Oil’s slump could upend $2 trillion in investments: Goldman Sachs
A combination of weak growth in oil demand and a global supply glut have kept pressure on crude prices, while the Organization of the Petroleum Exporting Countries, or OPEC, has refused to cut production.
In the interview, Alwaleed said the Saudi government and other oil producers were caught off guard by the steep drop in oil prices. That said, he sees the refusal to consider a production cut as a smart strategy aimed at preserving market share.
’[H]ad Saudi Arabia cut its production by 1 or 2 million barrels, that 1 or 2 million would have been produced by others.’Prince Alwaleed
“The decision to not reduce production was prudent, smart and shrewd,” he said. “Because had Saudi Arabia cut its production by 1 or 2 million barrels, that 1 or 2 million would have been produced by others. Which means Saudi Arabia would have had two negatives, less oil produced, and lower prices. So, at least you got slammed and slapped on the face from one angle, which is the reduction of the price of oil, but not the reduction of production.”