CRUDE oil markets are gearing up for further bloodbath! When Saudi Oil Minister Ali Naimi stood up to deliver his talk at the packed ballroom in Houston last Tuesday during the IHS CERAWeek, all eyes were focused on him. Hundreds of energy industry executives, researchers, pundits and analysts had come to hear what the OPEC's most powerful voice had to say. And his message was blunt: OPEC is more than happy to ride out cheap crude prices until higher-cost producers are pushed out of the market. The kingdom had no plans to cut its output to boost prices, he reiterated, underlining Saudi Arabia was prepared to withstand $20 crude if needed to thin the herd. "We don't want to, but if we have to, we will," he said. Minister Naimi's message to the eager audience was clear. A coordinated production cut by OPEC and non-OPEC exporters was "not going to happen - because not many countries are going to deliver." Lack of trust is impeding, he emphasized. "There is less trust (among the producers), why worry about cuts." And he added: "Not many countries are going to deliver. Even if they say they will cut production, they will not deliver, so there is no sense in wasting our time seeking production cuts," he added. And that the proposed freeze in output at January levels would require "all the major producers to agree not to add additional barrels." Yet there appeared a specific reason behind the outburst from Minister Naimi. Just hours before, Naimi appeared before the jam packed ballroom to give his assessment of the situation, the Iranian Oil Minister Bijan Zanganeh was quoted as saying that Iran had no interest in restraining production after sanctions against it were lifted, calling a joint Russian/Saudi proposal for major exporters to freeze output "laughable". "Some of our neighbors have increased their production to 10 million barrels a day... and now they have the nerve to say we should all freeze our production together," Iranian news agency ISNA quoted Bijan Zanganeh as saying. "So they should freeze their production at 10 million barrels and we should freeze ours at 1 million barrels - this is a laughable proposal," he added. Naimi had to respond. And he did. For the output freeze agreement was based on the principle that all major stakeholders, and indeed Iran included, would agree and contribute to that. Once Iran hardened its position, at least publically, Minister Naimi had little option to say something else that could have been music to the ears of some 2,800 delegated attending the annual mega event. And with this went down the hopes and expectations of and coordinated move by the stakeholders, both within and outside the OPEC, to stabilize the markets. Oil markets had rallied the week earlier, on news of a tentative agreement by Saudi Arabia, Russia, Venezuela and Qatar to freeze oil output, hoping the deal would eventually lead to a more definitive tightening of the spigot. Yet once the pronouncements were made, market sentiments changed and changed abruptly. Oil markets fell 4.5% on the day. In his presentation, Minister Naimi also made it clear that the oil supply glut was not caused by Saudi Arabia, but by high prices that caused "every barrel on Earth" to be produced. Enumerating the steps taken by Saudi Arabia and its allies in the energy world to avoid the glut and the consequent market slump, Naimi reminded that the oversupply through the summer of 2014, ultimately led to a meeting between OPEC and non-OPEC producers. The objective was cooperation, in which everyone participated and not confrontation. Yet, not everyone was apparently ready to move in this direction. "We met with non-OPEC producers, we asked 'what are you going to do?' They said nothing. We said the meeting is over." And now with the battle on, he told Daniel Yergin of IHS in plain terms that "Inefficient, uneconomic producers will have to get out, that is tough to say, but that's fact". Prices in $100 a barrel range encouraged inefficient producers to grow output, and those barrels will have to leave the market first, Naimi was straight. "It sounds harsh, and unfortunately it is. But it's the most efficient way to rebalance markets." And availing the opportunity, while standing before the packed room in Houston, the energy capital of the United States, Naimi also sent out a message of peace and understanding to the shale producers. Contrary to popular belief, the Saudis have "not declared war on shale" or on production from any country or company, he underlined. "Our purpose is not market share. Our purpose is to satisfy customer demand." And despite the gloom, all around, the industry veteran was not pessimistic. Although philosophical, yet his message to the industry was clear. "I've seen oil at under $2 a barrel and at $147, and much volatility in between. I've witnessed gluts and scarcity. I've seen multiple booms and busts," he emphasized with an insight that few in the industry could boast of today. "These experiences have taught me that this business, and this commodity, like all commodities, is inevitably cyclical. Demand rises and falls. Supply rises and falls. Prices rise and fall." And so would they, this time too – apparently was the message delivered to the 2,800 plus delegates present to hear what the old, wise man of the energy industry was there to say and deliver. Markets but are getting nervous. "Unless we see an even larger than expected fall in non-OPEC oil production in 2016 and/or a major demand growth spurt, it is hard to see oil prices recovering significantly in the short term," the Paris-based IEA said in a report last week. The sentiments have gone so pessimistic that in a survey of 13 investment banks by The Wall Street Journal, the banks foresaw Brent crude, averaging $39 a barrel this year, down $11 from the survey undertaken only last month, in January 2016. The banks see West Texas Intermediate, the US oil gauge, averaging $38 a barrel this year, also down $11 from the previous survey. Interestingly, the banks have cut their price outlook in every survey since August. Gloom seems set to deepen - further!