RIYADH: Today, Ali Al-Naimi, Saudi minister of petroleum and mineral resources, expressed his concerns over the soaring oil prices in the global market, saying the prices have been inflated by speculation and are "not justified" by market fundamentals.
"Based on the supply-and-demand fundamentals, crude oil prices should not be this high," said Al-Naimi following talks with Maxime Verhagen, Dutch deputy premier and minister of economic affairs.
Al-Naimi said that the lower demand for Saudi oil in March compared to February this year was a "sign of surplus supply" on the global market. This is in addition to the large quantities of commercial stockpiles or even surplus oil stocked idle in some producing countries, said the minister, while referring to the production cuts by the Kingdom. He pointed out that Saudi Arabia has cut down its daily output to 8.3 million from 9.1 million barrels in February.
Asked about the details of the talks between Al-Naimi and Verhagen, Bart Rijs, a spokesman of Dutch deputy premier, said that the two ministers had pledged to boost bilateral energy cooperation and check growing oil prices as fuel costs at the pumps in Holland has reached record levels. The meeting was attended by top officials, including Prince Abdulaziz Ibn Salman, assistant minister of petroleum and mineral resources.
On the high oil prices and cooperation with the Netherlands in energy sector, Rijs said that Al-Naimi had assured to meet the global oil demand and do whatever possible to ensure stable supply and stable oil prices.
"Energy speculation has become a growth industry and it is time for the government to intervene and to work together," said the spokesman, while referring to the wide-ranging talks between Al-Naimi and the Dutch minister.
Asked about the possible operation of the SABIC (Saudi Basic Industries Corp.) facility in the Netherlands, the spokesman said that the two sides discussed about the SABIC's cracker facility and agreed to cooperate in upgrading and modernizing this facility in Geleen. According to reports, the naphtha cracker will resume operations this week. This facility in the Dutch city of Geleen has annual production capacity of 1.31 million tons of ethylene, which is used in plastic products, such as carrier bags and water bottles.
This SABIC cracker was shut down on Jan. 26 because of some technical problems. The spokesman said that the Dutch government was committed to support the modernization plan and ready to assist the SABIC in whatever way it can. He pointed out that a possibility to establish a top-notch joint research center in the Netherlands, predominantly in energy and gas sector, was also discussed during the ministerial meeting. The center will train young Saudi students and researchers.
To this end, he noted that the Netherlands had unparalleled technical know-how in gas sector and this innovation can be taught to the Saudi students. The plan to set up the research center was welcomed by the Saudi side. The Netherlands is presently the second largest natural gas producer in the European Union and the ninth in the world, accounting for more than 30% of the EU's total annual gas production and about 2.7% of the annual world's total production.
He said that Verhagen who had several meetings with top Saudi and Dutch investors, businessmen and executives, arrived in Riyadh Monday night. His visit, Rijs said, was mainly intended to discuss bilateral energy cooperation and find out measures to check soaring oil prices in the global market. They also reviewed the working of the International Energy Forum (IEF) and shared greetings on the approval of the new IEF charter, which has already been signed by some 90 countries, he added.
To this end, he said that the Dutch side has appreciated the role of the Kingdom, which has gone extra mile to support IEF, foster dialogue among producers and consumers and ensure that the oil prices remain within the acceptable price band. Today, one liter of unleaded fuel costs on average €1.69 at the pump in the Netherlands [close to $9.40 a gallon]. Verhagen was also informed about the plans and proposals of Saudi Arabia and OPEC in terms of oil production.
Source: Arab News, Saudi Arabia, April 20, 2011. Changes were made in keeping with the editorial policy of www.memrieconomicblog.org