Saudi Energy Minister Says Oil Price Above $50 Needed for Balance

The oil industry needs a price of more than $50 per barrel to sustain investments, Saudi energy minister Khalid al-Falih told a German newspaper while adding that downward pressure on prices would prevail because of a huge stocks overhang.

“We need a price higher than $50 to achieve a balance in oil markets in the long term,” Falih, who took over earlier this year from veteran Saudi oil minister Ali al-Naimi, told German business daily Handelsblatt.

“And just as $50 is too low to sustain investment, prices in excess of $100 are too much. The optimum lies somewhere in between,” he said.

Falih said the oil markets were rebalancing thanks to output drops in countries such as the United States but it would take a long time before balance was achieved.

“We have seen a decrease in supply by roughly one million barrels of crude oil per day,” he said, referring to output in the United States and Canada.

“At the same time, demand has recovered, meaning that supply and demand are now more balanced again. But there are still excess stocks on the market – hundreds of millions of barrels of surplus oil. It will take a long time to reduce this inventory overhang.”

“That said, there are economic headwinds in some important markets and we hope this does not trigger a slowdown in global demand,” he said.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza