Baku, Azerbaijan, April 3
By Aygun Badalova - Trend:
Saudi Arabia to continue to shrug off calls from smaller OPEC members to cut oil output for the foreseeable future, Jason Tuvey, Middle East Economist at British economic research and consulting company Capital Economics believes.
"Saudi Arabia's lack of a response to the plunge in oil prices has triggered a torrent of conspiracy theories, including plots to hurt Russia and Iran. These have been given extra prominence in light of the latter's apparent role in the escalating conflict in Yemen," Tuvey said in a report obtained by Trend.
However, economist expects the muted reaction from Saudi Arabia has more to do with the Kingdom taking a long-term view of the oil market.
As oil prices tumbled in the second half of last year, Saudi Arabia refused to bow to pressure from other OPEC members to cut oil output in order to shore up prices, economist mentioned.
"And recent comments from Saudi Oil Minister, Ali al-Naimi, suggest that the Kingdom has no plans to change tack," he said.
Tuvey also stressed that the key point is that the Kingdom can afford to take a longer-term view of the oil market. "Saudi Arabia has already started to draw down its vast foreign exchange reserves in order to finance a current account deficit and it can do this for many years to come," he said.
"The Saudis clearly feel that, by pushing up oil prices now, they would simply encourage further development of unconventional sources of oil which would ultimately threaten the Kingdom's long-term position in the oil market and, in particular, its market share in regions where oil demand is still growing at a rapid clip," economist added.
In short, then, economist believes, Saudi Arabia seems willing to tolerate low oil prices now in the hope that prices are higher in the long-run.
OPEC members, excluding Iran, earned about $730 billion in net oil export revenues in 2014, which represents an 11-percent decline from the $824 billion earned in 2013, according to the estimates of the US Energy Information Administration (EIA).
The decrease was largely because of the decline in average annual crude oil prices, and to a lesser extent from decreases in the amount of OPEC net oil exports.
Saudi Arabia earned the largest share of these earnings, $246 billion in 2014, representing approximately one-third of total OPEC oil revenues, according to the EIA's estimates.
OPEC members held a meeting in ministerial level November 27, 2014 to evaluate the global oil market and the falling trend of the oil price. Iran and Venezuela wanted to lower the Cartel's oil output and set a new ceiling level below the current 30 mbpd level.
Aygun Badalova is Trend Agency's staff journalist, follow her on Twitter:@AygunBadalova
