LONDON (Reuters) - The steep fall in oil prices is causing “havoc” with investment plans in oil producing countries and jeopardizes future oil supplies, Saudi Arabian Oil Minister Ali al-Naimi said on Friday.
Naimi told a meeting of producer and consumer countries in London that oil prices, which have fallen by more than $100 a barrel from a high of almost $150 in July, were already too low to support some necessary investment in energy projects.
“Today’s price levels are wreaking havoc on the industry and are threatening current and planned investments,” he said.
Naimi, representative of the Organization of the Petroleum Exporting Countries’ biggest oil producer, repeated previous assertions that $75 a barrel was a “fair and reasonable” price for crude oil. Benchmark U.S. crude oil futures for January fell below $36 on Friday.
“It is the price that marginal producers need to maintain investments sufficient to provide adequate supplies for future oil consumption needs. When oil is priced lower, such as it is now, there will be less investment and less future supply.”
OPEC this week agreed a 2.2-million-barrel-per-day (bpd) cut in supply to try to balance supply and demand and put a floor under sagging prices.
The reduction is in addition to a 2 million bpd cut in supply by the producer group since September, which included a 1.5 million bpd cut from November.
OPEC’s Secretary General Abdullah al-Badri said the producer group’s compliance with its November cut of 1.5 million bpd was about 60 percent.
Naimi said stable oil prices were essential to ensure long-term investment in the energy industry, adding he thought “non-fundamental factors” such as rapid and substantial financial deleveraging had contributed to the sharp price falls of recent months.
“I continue to believe that non-fundamental factors continue to impact oil prices, both upwards and downwards,” he said.
Saudi Arabia believed all viable energy sources, including renewables, had a part to play in meeting the world’s energy needs, he said.
The kingdom was investing in renewable energy but there was a need to be realistic about the possible role of such energy in the global mix.
“Saudi Arabia sees a role for all viable energy sources to meet global needs,” he said.
Naimi said Saudi Arabia would continue to invest in upstream and downstream energy projects despite the world economic crisis, but the kingdom’s mega projects would not be enough on their own to meet world energy needs.
“We are committed to investing to help ensure an uninterrupted supply of energy to the world,” he said.
Reporting by Peg Mackey and Christopher Johnson; editing by James Jukwey