The lack of a clear leader or anchor in the global oil market is fueling uncertainty and leading to sharp swings in crude prices, but this uncertainty is unlikely to continue for long, a senior Saudi oil adviser said.
"In the current circumstances, the international oil market could continue in an unstable situation, where there is a lot of uncertainty with the lack of a market anchor," Ibrahim al-Muhanna, an adviser to the Saudi oil minister, told a closed-door energy event in Kuwait, Trade Arabia reported.
"In the end, this means the inability of investors to find a suitable price in the market currently and in future. This is an unnatural situation and it is difficult to see it continuing," he said.
Top oil exporter and OPEC heavyweight Saudi Arabia was the driving force behind OPEC’s landmark decision, at its meeting in November last year, not to cut oil output to support prices and instead seek to defend market share.
The decision, which is a shift from OPEC's traditional role of reducing production to prop up prices, has along with a supply glut helped trigger a sharp drop in crude prices in the last year.
The kingdom is sending a clear message that it is no longer willing to shoulder the burden of reducing production alone and if others want better prices, they should take on their share of output cuts. Persian Gulf oil producers see no sign of Saudi Arabia wavering in its long-term strategy, particularly when other OPEC members such as Iraq are raising production and Iran is gearing up to boost exports by next year.
Non-OPEC producers, including Russia, have refused to cooperate with OPEC in cutting output.
Muhanna stressed on the need for greater international cooperation to reduce speculation and support a healthy oil market, but did not describe in detail how such a structure would work or say how likely it was to be established.
"Global demand for oil was expected to rise by at least one million barrels per day every year, driven mainly by economic growth in Asia, Africa and Latin America, and the world's oil consumption would reach about 105 million bpd by 2025," he said.
A US Energy Information Administration's report on Tuesday predicted global oil demand for 2016 would rise by the fastest rate in six years, suggesting the crude surplus that has pushed prices down about 50% since June last year is easing faster than expected.
