RIYADH – Saudi Arabia's OPEC Governor Mohammed Al-Madi said on Sunday that he believed it would be difficult for oil to reach a price range of $100-120 per barrel again. “$100-120 – I think it's difficult to reach 120 another time…we understand that all countries need higher incomes…we want higher incomes, but we want higher incomes for us and future generations,” Madi told an energy conference in Riyadh. Brent crude is currently around $55 per barrel. He also repeated that Saudi Arabia had no political motives in its oil policy. “There isn't any political dimension in what we do at the oil ministry – our vision is commercial and economic…we didn't mean to hurt anybody, our vision is simply the following: the producers which have low costs have to have the priority to produce, but those who have high costs have to wait for their turn to produce,” he said. “We are not against anybody or against the (production of US shale oil)…on the contrary, we welcome it, as it balances the market in the long run.” Some producers such as Iran oil prices slide rather than trying to support them with an OPEC production cut. But Madi said on Sunday that the price drop was because of fundamental supply and demand factors, not any non-economic policies. “Was OPEC able to control prices? The answer is, if OPEC could have controlled the prices it would have done so, but it is not in the interest of OPEC to control the prices. “It is OPEC's interest to achieve balance in the market. The price is decided by the market, and the market is subject to supply and demand.” The next big threat to oil prices isn't from OPEC or Bakken shale. It's Russian samovars, or teapots. Simple refineries that process crude into fuel oil are scaling back, because when oil prices slump, the government reduces the discount that these refiners – known as teapots to those in the industry - get for exporting fuel. They use less crude, freeing it up for sale abroad, which in turn adds to the global glut. Russia may increase oil exports by as much as 250,000 barrels a day this year, according to James Henderson, a senior research fellow at the Oxford Institute for Energy Studies who's followed the country's energy industry for more than 20 years. That would equate to 5 percent growth in shipments, the most in at least a decade. “The pain Russia is feeling from low oil prices has made more crude available for export,” Henderson said by phone March 18. “Quite a few of Russia's simple refineries could reduce their runs.” Rising shipments from Russia, which ranks with Saudi Arabia and the US as the world's biggest oil producers, would put more pressure on crude, already down more than 50 percent from last year. Falling energy prices and US and European Union sanctions imposed last year in response to the Ukraine crisis have pushed Russia to the brink of recession, damping demand for refined fuel products in the country. Brent was up 74 cents to $55.17 a barrel at 3:26 p.m. in London. It slid 2.7 percent to $54.43 on Thursday. Crude loadings from Russian ports are 9.5 percent higher in the first quarter year over year, according to shipment schedules obtained by Bloomberg. Teapot refineries processed as much as 800,000 barrels of crude a day last year, Igor Dyomin, a spokesman for Russia's state-run pipeline operator, OAO Transneft, said by phone March 19. A teapot refinery is one that produces mostly fuel oil rather than more premium fuels, according to Dyomin. Seven simple plants with a combined capacity of 1.2 million barrels a day are most at risk in the current price environment, according to Henderson. There could be sporadic cuts to refining of 400,000 barrels a day during the next few months' maintenance season, with much of the unused oil exported, putting more pressure on crude prices, according to JBC Energy GmbH, a Vienna-based consulting company whose clients include OPEC. The additional barrels would arrive as the Organization of Petroleum Exporting Countries, whose 12 members produce about 40 percent of the world's oil, sticks to plans it announced in November to maintain its own output in response to the global supply glut. The move has yet to lead to a drop in production by the biggest non-OPEC countries. US output, fed by growth in hydraulic fracturing and horizontal drilling in the Bakken and elsewhere, has soared to 9.42 million barrels a day, the most in more than 30 years, even as oil companies scale back investment and the number of active rigs drops to the lowest since 2011. — Agencies
