Saudi Arabia to keep up pressure on high-cost producers, oil futures slump

“We will satisfy the demand of our customers. We no longer limit production. If there is demand, we will respond. We have the capacity to respond to demand,” Ali al-Naimi said on the sidelines of an event in the country’s capital, Riyadh, on Wednesday, The Wall Street Journal reported.

“It is a reliable policy and we won't change it,” al-Naimi added.

The news contributed to a 2.61% drop in West Texas Intermediate crude futures to $36.88 a barrel as of 13:33GMT. Brent futures were down 2.19% to $36.98 per barrel.

WTI futures were thus on track for a record two-year drop of over 60% and by approximately 19% for 2015.

Unsurprisingly, the worst performers in the benchmark S&P 500 year-to-date had been the shares of shale and oil sands-related companies, such as Chesapeake Energy Corp., CONSOL Energy and Southwestern Energy.

Out on the Footsie, only Royal Dutch Shell was to be found in the lowest decile of stocks in terms of share price performance thus far in 2015, with miners having borne the brunt of losses. However, over on the second-tier index the likes of Tullow Oil, Weir Group, Ophir Energy and Amec Foster Wheeler were all to be found near the bottom of the pile.

On 29 December, Saudi Arabia announced it would revamp its energy subsidies in a move which was widely seen as preparations for a scenario in which oil prices stayed lower for longer.

Acting as a backdrop, many in the oil industry were keenly awaiting for the potential start of the return of Iranian crude to the market should sanctions finally be lifted in early 2016.

A recent cease-fire in Libya also held the potential for increased exports from the North African producer, some observers said.

Al-Naimi’s words echoed remarks from Khalid al-Falih, the chairman of Saudi Aramco, who speaking on 29 December reportedly said that “Saudi Arabia more than anyone else has the capacity to wait out the market until this balancing [he forecast that oil demand would again outstrip supplies sometime in 2016] takes place.”