WHAT is driving the Saudi oil policy, or to extend it further, the current OPEC oil policy? The debate is on and refuses to end. Yet, the view from Washington seems getting close to the Saudi take on the global energy dynamics. Saudi Arabia, by continuing to push for higher output is not aiming to curb the US production, as some regard, but instead is attempting to maintain its share of the global oil markets, argued David Petraeus, the still influential, former director of the United States Central Intelligence Agency. Despite the fall from grace, Petraues continues to be a Washington insider. In fact he is set to represent the United States on security issues at the upcoming Bilderbeg conference, so romanticized by William Engdahl in his book, 'A Century of War - Anglo-American Oil Politics and the New World Order' for its May 1973 meeting and the role in oil price jump later the year. "I'm very confident that what they (the Saudis) are doing is trying to keep their market share, not trying to drive others out of the market. Now if that happens, so be it," he told the program "Wall Street Week" scheduled to be televised Saturday (yesterday). Petraues further underlined that Saudi Arabia understands that the US is becoming a more efficient oil producer and that there is not a set cost for production, Bloomberg reported citing the interview. The Saudi Ministry of Petroleum in a press statement last Tuesday too underlined, in rather clear terms, that the rise in Saudi output over the past three months was a result of increased global demand and the needs of its customers and not to compensate for lower oil prices - as some continue to assert. In fact, Saudi Arabia is prepared to increase its oil output further in the coming months to a new record to meet a rise in global demand, despite increased domestic use, Ahmed Al-Subaey Saudi Aramco's executive director for marketing was quoted by Reuters as saying last Thursday. "We have plenty of crude... You are not going to see any cuts from Saudi Arabia," Al-Subaey said after meetings in New Delhi. And the policy is set to continue. Already Saudi Arabian crude output hit a record level in May, as a result of this increased demand. Saudi crude output in May reached 10.33 million bpd as compared to 10.31m bpd in April, Opec reported. With summer just round the corner, Saudi Arabia needs additional crude to generate power required to meet the spiking summer demand. The kingdom also has a new 400,000-barrel-a-day refinery at the Red Sea port of Yanbu to feed. Hence Saudi Arabia needs additional crude to meet the burgeoning domestic crude demand without jettisoning its regular crude customers. In case output doesn't go up, hand in hand, crude exports could be impacted. Other OPEC states too are on course to increase their output. Iraqi production is on up too. As per OPEC figures, Baghdad pumped about 3.8 million bpd in May. If sustained, this could set a national record, analysts underline. And Baghdad seems set to continue with the policy - come what may. Even if prices were to fall to $20 a barrel, “we don't think we will reduce exports. We will increase production,” Falih Alamri, director general of the state-run Iraqi State Organization for Marketing of Oil, was quoted as saying recently at an Iraq oil conference in London. Optimism of a kind seems creeping back in OPEC headquarters. At the Opec ministerial last week, Saudi Oil Minister Ali Al-Naimi said he expected demand to rise and supplies to decline, bringing the market into balance later this year. Such a scenario would tend to push prices higher. In its Monthly Oil Report (MOR) too, OPEC pointed out that low oil prices were driving demand up in places like the US, where sales of gas-guzzling sport-utility vehicles and pickup trucks have risen. There were also positive figures about demand in Europe and China, OPEC analysts reported. “The current oversupply in the market is likely to ease over the coming quarters,” the report said displaying some optimism in its ranks - finally. As per monthly oil report, the global oil demand in 2015 is growing to 92.5 million bpd as compared to 91.3 million bpd in 2014. “The global economy recovery appears to have stabilized at a moderate level,” OPEC said, projecting the non-OPEC supply to decline in the second half of the year, compared with an increase in the first six months. “The current oversupply in the market is likely to ease in the coming quarters,” the report added, expecting the call on its crude to stand at 29.3m bpd in 2015. However, with OPEC's May output touching the 30.98 million bpd, it is overshooting the target by a considerable margin. But again one has to concede; the output figure of 30 million bpd outlined by OPEC, was an "indicator" and not a ceiling, as Secretary General Abdalla Salem El-Badri had clarified - in rather plain terms - last week. Earlier the year, while talking in Berlin, Minister Naimi had insisted, 'history will vindicate the Saudi oil strategy.' He then added, "going forward, I hope and expect supply and demand to balance and for prices to stabilize... Global economic growth seems more robust." He had also reiterated then that Saudi Arabia was not responsible for "subsidizing" higher cost oil producers, emphasizing the Saudi position that the Kingdom would not reduce its output unless there was less demand from customers. "In November (2014), OPEC made an historic decision, it did not interfere in the market. I think history will prove that this was the correct path forward," he said. Firming up demand levels seem ruling the markets, generating some sense of optimism within OPEC ranks. Are markets out of woods - finally? Is this a vindication of the Saudi oil strategy? Let's wait for some more time before giving the final verdict on the issue. Yet the trend is getting less hazy - the strategy seems working - at least for now. And the unexpected support from far-flung Washington is all the more welcome in this phase of intense focus and debate on the Saudi oil policy.
