The Saudis understand that the market is been flooded with oil and that fifty dollar oil will force at least some of that flood to be stemmed. It will hurt but losing massive market share will actually hurt just as much and that will be difficult to recover. This way they can make adjustment and plausibly ride it out for a couple of more years.
By Sachin Trivedi | January 13, 2015 12:22 PM EST
In a statement that may be of some interest to oil producing companies in the U.S, Saudi Prince Alwaleed Bin Talal has reportedly said that oil may not touch $ 100 again. He also slammed conspiracy theories about allowing the commodity price to fall to hurt Russia. Meanwhile Goldman Sachs has cut its oil Price forecast for 2015 from $ 83.75 to $ 50.40.
Prince Alwaleed Bin Talal is a billionaire businessman from Saudi Arabia. He spoke to USAToday about the falling oil prices. The prince reportedly said that no one anticipated the huge fall in oil prices and anyone saying otherwise was lying.
The prince justified Saudi Arabia's move to not cut production and stabilise the global oil prices. Saudi Arabia is one of the largest oil exporting countries in the world and a leading member of OPEC. According to the prince, if the country had cut production by 1 or 2 million barrels, the same would have been produced by other countries.
The prince blamed the low oil prices on both oversupply as well as weak demand globally. He reportedly said that Iraq has emerged as a major producer and even a country like Libya, which is facing Civil War, is also continuing to produce oil. The U.S is also producing shale oil and gas. He also pointed out that countries like Japan, China, India and Germany are experiencing slow growth.
Given the current situation, the U.S bank Goldman Sachs has cut its oil price forecast for 2015. According to a report by Reuters the bank estimates that the low oil prices may fall to high $ 30s the short-term. The bank also reportedly estimates that the commodity prices will remain low for a longer duration in light of the oversupply in the global market.
Prince Alwaleed Bin Talal also reportedly said that the oil prices may continue to fall. According to the prince, the prices may go up if there is a drop in production and improvement in demand. In his view the price of oil will "never" touch $ 100 again, a price he called as artificial.
The prince confirmed in the report that Saudi Arabia will not cut production and lose market share. He reportedly said that the other OPEC countries can't be trusted and he based this on the country's experience from the 1980s and 90s.
According to the prince, Saudi Arabia is trying to capitalise on the current situation by hoping that oil price below $ 50 will make some of the new projects in the industry economically unviable. He called the conspiracy theories about Saudi Arabia trying to hurt Russia with low oil prices as "baloney" and said that his country was hurting just as badly as Russia.