Saudi oil minister Ali bin Ibrahim Al-Naimi said Tuesday that big producers will meet next month to discuss a production “freeze,” but he didn’t believe an agreement would be reached.
A production freeze would be a big step toward ending the global glut of crude oil by taking pressure off supply to rebalance the market.
“Freeze is the beginning of a process, and that means if we can get all the major producers to agree not to add additional balance, then this high inventory we have now will probably decline in due time. It’s going to take time,” Naimi said.
Saudi Arabia and Russia began talks on slowing the rate of production earlier this month, but they need buy-ins from countries such as Iran before a freeze can be implemented. Iran is set to bring online millions of barrels of new capacity next month as sanctions are removed as part of an international nuclear deal with the Islamic Republic.
“It is not like cutting production,” Naimi said. “That is not going to happen because not many countries are going to deliver even if they say they will cut production, they will not deliver. So there is no sense in wasting our time seeking production cuts.” Other Saudi officials have suggested negotiating to keep production relatively the same as it was in January, but it is not likely Iran would agree to that since it would mean curtailing its plans for entering the market in the spring.
Naimi made his comments after giving a keynote speech at the week-long IHS CERAWeek energy conference in Houston.
Naimi had not been in the U.S. for about a year since announcing his country, with the largest oil reserves in the world, had no plans to hault oil production as prices began to nudge downward.
Many believe keeping production high was a tactic to keep prices low to kill off U.S. shale oil producers by making fracking uneconomical. Low prices have caused thousands of layoffs and dozens of fracking operators to reduce the number of rigs pumping oil.
The CEOs of major oil companies are scheduled to speak later Tueday at the conference, and they are expected to be frank in their responses to the Saudi oil minister’s remarks. Many of the companies lost substantial revenue in the fourth quarter of last year due to the low price of crude oil.
