Oil prices would be "easily in the three-digit range" without Saudi Arabia's spare production capacity serving as a cushion for the market, energy minister Khalid al-Falih said Monday.
"We expect and demand that Saudi Arabia's efforts be acknowledged," Falih said at the India Energy Forum by CERAWeek in New Delhi. "These supply disruptions need a shock absorber. The shock absorber has been to a large part Saudi Arabia."
He later told reporters on the sidelines that Saudi Arabia, which is currently producing about 10.7 million b/d, would raise its crude production next month. US sanctions on Iran go into effect November 5.
The kingdom has faced accusations by the US for not producing enough oil to bring down prices, and tensions between the two countries ratcheted up over the weekend over the disappearance and alleged murder of Saudi dissident and writer Jamal Khashoggi.
US President Donald Trump said Saudi Arabia could "face severe punishment" if it was proven Khashoggi had been killed inside the kingdom's consulate in Istanbul, prompting Saudi Arabia, the world's largest crude exporter, to warn that it would "respond with greater action," noting its "influential and vital role in the global economy."
Falih did not address the controversy in his comments Monday. But he said Saudi Arabia has invested "tens of billions" of dollars to build its spare production capacity.
"Given the disruptions that have taken place, oil would be easily in the three-digit range had it not been for the extra efforts the kingdom had done," Falih said. "Saudi Arabia has proactively, deliberately and responsibly invested in its spare capacity."
The minister has said Saudi Arabia can produce 12 million b/d at will, and with current production around 10.7 million b/d, that leaves about 1.3 million b/d of spare capacity.
He said Saudi Arabia would act as "the central bank of the oil market" to help keep supply and demand in balance.
Saudi Arabia has never reported higher production across an entire month than 10.72 million b/d in November 2016, according to OPEC records.
MEETING CUSTOMER NEEDS
Falih pledged his country's "full commitment to meeting India's oil demand" and said he wanted to reassure consumers that any supply shortfall would be met, though current fundamentals were in balance.
"We are in close contact with all major consumers to seek their views and listen to their concerns and take those into consideration as we set the kingdom's energy policy and discuss it with our partners in OPEC and outside of OPEC," he said, adding that he had met with Indian Prime Minister Narendra Modi and oil minister Dharmendra Pradhan earlier Monday.
"I want to assure you of our commitment to supply your energy needs, especially oil, and more broadly to promote market stability and to offset any market shortfall," Falih added.
OPEC and 10 non-OPEC partners, including Russia, agreed June 23 in Vienna to boost output by a combined 1 million b/d to offset any coming losses from US sanctions on Iran, which go into force November 5, and Venezuela's continued decline.
OPEC Secretary General Mohammed Barkindo last week acknowledged that he had received a letter from India, one of the world's top importers, expressing "discomfort" over the current oil market.
Prices have hovered near four-year highs in recent weeks, over fears that OPEC would not be able to keep the market supplied.
"As one of our major consuming countries, of which we have an official energy dialog, it was also a concern for us getting this feedback from India," Barkindo said in London.
Falih also warned about peak demand theories drawing investment away from oil, noting that electric vehicles currently only displace 30,000 b/d of oil consumption. He said Saudi Arabia was continuing to invest in its production capacity, seeing oil remaining the dominant energy source for decades to come, as demand continues to rise, particularly in the developing world.
"Had we not built spare capacity, imagine the tight spot we would be in today, not being able to meet rising demand," he said.
