Saudi Arabia is determined to stick to its policy of pumping enough oil to protect its global market share, despite the financial pain inflicted on the kingdom's economy.
Saudi officials said the world's largest exporter will produce enough oil to meet customer demand, indicating that the kingdom is in no mood to change tack ahead of the December 4 OPEC meeting in Vienna, CNBC reported.
"The only thing to do now is to let the market do its job," said Khalid al-Falih, chairman of the state-owned Saudi Aramco. "There have been no conversations here that say we should cut production now that we've seen the pain."
Riyadh rocked oil markets last November when OPEC decided against production cuts, making clear that the kingdom was abandoning its policy of reducing supplies to stabilize the price.
Since then, the oil price has collapsed from a high of $115 a barrel last year to $50 a barrel. Global oil companies, which have put hundreds of billions of dollars of investment on hold as a result of low prices, will be disappointed by the kingdom's stance.
The effect on business sentiment has sparked domestic criticism of the market share policy engineered by Ali al-Naimi, the oil minister, and agreed by both the late King Abdullah and the current King Salman, who was crown prince last year and ascended the throne in January.
Officials in Riyadh say their policy will be vindicated in one to two years when revived demand swallows the global oil glut and prices begin to recover. For higher-cost producers, "$100 oil was perceived as a guarantee of no risk for investment", Falih noted. "Now, the insurance policy that's been provided free of charge by Saudi Arabia does not exist anymore."
Falih, who is also health minister, forecast the market would come into balance in the new year, and then demand would start to suck up inventories and storage on oil tankers.
Other officials estimate that it would probably take one to two years for the market to clear up the oil market glut, allowing prices to recover toward $70-$80 a barrel.
Meanwhile, Venezuela's President Nicolas Maduro is expected to arrive in Saudi Arabia on Tuesday to attend the summit of South America, where he will propose a plan to stabilize oil prices to help maintain investment levels.
