Saudi Arabia Sends Mixed Signals About Adding to a "Saturated" Global Market

Khalid Al-Falih, energy minister for Saudi Arabia, said his country can pump as much as 12.5 million bpd

Saudi Arabia is once again positioning itself prior to the Organization of the Petroleum Exporting Countries' (OPEC) freeze talks as amenable to market concerns by stating it won't flood the market with increased output before the meeting; but the kingdom's tone is reinforcing some critics' view that the Saudis' singular concern is themselves.

In an interview with Al-Arabiya television this week, Khalid Al-Falih, energy minister for Saudi Arabia, said that although his country can pump as much as 12.5 million barrels per day (bpd) of oil, "The market is now saturated with stored crude at beyond usual levels, and we don't see in the near future a need for the kingdom to reach its maximum capacity."

As OPEC's top crude exporter, the Saudis have been responsible for a good amount of that saturation and continue to pump at near record levels – 10.67 million bpd in July alone - in order to maintain market share at the expense of U.S. shale producers.

Moreover, analysts have fretted over industry sources recently telling Reuters that it is contemplating increasing output yet again, despite market conditions.

Al-Falih in his interview added that Saudi's output is based entirely on customers' needs and no specific figure for production is ever targeted; he also remarked that despite low prices, "demand for oil does not worry me" and that the demand in China is "very healthy" and consumption in India is "very good."

But in a seeming contradiction of suggesting his kingdom won't reach maximum capacity prior to the Algeria summit, Al-Falih declared that "Saudi Arabia will remain flexible in its petroleum policy; we will meet demand if it rises as was the case for this year and last year."

Abdulsamad al-Awadhi, a London-based analyst and former Kuwait representative to OPEC, is not impressed by the energy minister's stance: "Saudi Arabia is not interested for the time being in coming to terms with the impact of low oil prices on producers' economies.

"To state that as long as we have requests from customers for crude we will meet them at any price shows a total disregard for others."

Earlier this week, Julian Lee, oil strategist for Bloomberg First Word, predicted that Saudi Arabia may turn out to be a willing player in the OPEC summit due to its domestic demand beginning to fall in line with its normal seasonal pattern in September: "Freezing output at a seasonal high point is much more attractive than doing it at the seasonal low."