Saudi Arabia warns of supply crisis if low prices persist.

KSA warns of supply crisis if low prices persist. (AN).

JEDDAH: Long-term oil market fundamentals remain robust but prolonged low prices could threaten security of supply and pave the way for a price spike, warned Saudi Arabia on Monday.

Prince Abdul Aziz bin Salman, deputy minister of petroleum and mineral resources, told a round table meeting for Asian energy ministers in Doha that the oil and gas industry has canceled around $200 billion of investments this year, with energy companies planning to cut another 3 to 8 percent from their investments next year, marking the first time since the mid-1980s that industry cut the spending for two consecutive years.

He said current sharp oil price fluctuations are very harmful to oil producers, consumers and workers alike.

Just like high oil prices can’t last, a prolonged period of low prices is “also unsustainable, as it will induce large investment cuts and reduce the resilience of the oil industry, undermining the future security of supply and setting the scene for another sharp price rise,” said the prince.

“As a responsible and reliable producer with long-term horizon, the Kingdom is committed to continuing to invest in its oil and gas sector, despite the drop in the oil price,” he said.

Prince Abdul Aziz pointed out: “Despite all the macroeconomic uncertainties engulfing the global economy, oil demand continues to grow at a robust pace and set to increase by 1.5 million bpd in 2015, the strongest growth seen in the past few years. This is in contrast to the early 1980s where global oil consumption fell between 1980 and 1984 by more than 2.3 million bpd.”

In order to meet the expected increase in demand, the world needs all sources of energy, including oil, gas, renewables, nuclear, and solar, he said.

The Kingdom has always been of the view that there are plenty of resources to meet the projected increase in demand.

“After three years of positive growth, non-OPEC supply is expected to fall in 2016; only one year after the deep cuts in investment,” said Prince Abdul Aziz.

He said Saudi Arabia plays, and will continue to play, a proactive role in stabilizing oil market conditions by building on its close relationship and ongoing cooperation with both producers and consumers, and through its effective and constructive engagement in OPEC and The International Energy Forum. Hmmm.....Expect Coming December OPEC meeting to result in a serious price hike. For Canada it will be a double whammy as the Trudeau gov is planning a carbon tax on petrol as well, this will do wonders for the economy.

HT And source:

#SaudiArabia now warns of supply crisis if low oil prices persist https://t.co/RmVjtQCS2D @dr_davidson pic.twitter.com/7yCdaouBdY

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Oil above $101 on Egypt unrest, U.S. stockpiles fall because of a temporary pipeline shutdown from Canada.

Oil above $101 on Egypt unrest, U.S. stockpiles fall because of a temporary pipeline shutdown from Canada.(HD).

The price of oil stayed above $101 a barrel Thursday after being jerked higher by unrest in Egypt and a fall in U.S. energy stockpiles that suggests a recovery in demand.

Benchmark crude for August delivery was up 16 cents to $101.40 at midday Bangkok time in electronic trading on the New York Mercantile Exchange. The contract gained $1.64 to $101.24, its highest close since May 3, 2012, on Wednesday. Nymex floor trading is closed Thursday for the Independence Day holiday.

Two events propelled the price of oil higher in the past day: unrest in Egypt and a big drop in U.S. oil supplies.

Traders were worried that political upheaval in Egypt could slow the flow of oil from the Middle East to world markets. Embattled Egyptian President Mohammed Morsi vowed not to give in to protesters' demands for his resignation. But the head of Egypt's military announced late Wednesday night local time that Morsi will be replaced and new elections will be held.

Egypt is not an oil producer but its control of one of the world's busiest shipping lanes gives it a crucial role in maintaining global energy supplies. The Middle East accounts for about a quarter of the world's crude oil output, or 23 million barrels per day. About 2 million barrels of that, or 2.2 percent of world demand, are transported daily through the Suez Canal, which links the Mediterranean with the Red Sea.

Much of that oil is headed to Europe, but a supply drop anywhere in the world leads to higher prices everywhere.

In the U.S., the Energy Department reported Wednesday that crude supplies fell by 10.3 million barrels from the previous week, more than three times the drop that analysts had expected.

The drop was likely the result of reduced supplies from Canada because of a temporary pipeline shutdown, as well as increased demand from a BP refinery that restarted in Indiana.

Gasoline supplies fell as well, while analysts expected an increase. The drop in oil and gas supplies could be an indication that U.S. demand is rising.

Brent crude, which is used to set prices for oils used by many U.S. refineries, was down 26 cents to $105.50 on the ICE exchange in London.Hmmm.....Who needs Canadian oil, Shut those pipelines.Read the full story here.

Related: Market Buzz: Oil advances on Egypt unrest