Saudi Arabian Minister of Petroleum and Mineral Resources Ali al-Naimi on Monday said he expects oil demand to pick up in the second half of this year while supply decreases, in a sign that the kingdom’s strategy of defending market share is working.
The comment indicates Saudi Arabia is likely to propose not to change output policy at producer group OPEC’s meeting on Friday, although Naimi declined to speak directly on the issue.
“The answer is yes,” al-Naimi said in his first public comment upon arrival in Vienna, where the meeting is scheduled to take place, when asked whether the strategy of defending market share through higher supplies and lower oil prices was working.
“Demand is picking up. Good. Supply is slowing, right? That is a fact,” he told reporters. “You can see that I’m not stressed, I’m happy.”
Naimi was the key architect of OPEC’s decision at its last meeting in November last year not to cut crude production despite a growing global glut, exacerbated by a boom in US shale oil.
Instead, OPEC kingpin Saudi Arabia raised production to win back market share and depress the output of higher-cost producers through lower oil prices, which fell from as much as US$115 in June last year to as low as US$46 in January.
However, prices have recovered in recent weeks to between US$60 and US$65 per barrel on the possibility of a major slowdown in US oil output and signs of stronger global demand.
Al-Naimi said it would take time for the oil markets — still heavily oversupplied — to rebalance.
“I don’t have a crystal ball, but it is [going] in the right direction,” he said.
He added that he was not concerned by prospects of an increase in Iraqi or Iranian supplies later in the year.
He said he doubted that millions of barrels of oil stored in recent months by traders and oil companies would be offered anew in the market, thus leading to a fresh drop in prices.
He said one reason why that would not happen was the narrowing contango — a market structure in which future prices are higher than current prices, encouraging the storage of oil for resale at a profit in the future. The opposite structure, backwardation, has current prices higher than future prices.
“This is not a good time to sell the surplus. So they [traders] have to keep it, and as the contango goes down and they see the backwardation coming forward they will hang on to it. They are not going to dump it on the market,” al-Naimi said.
POOR INTERNAL CONTROLS: Insurance Bureau Director-General Shih Chiung-hwa said the company is expected to get back on track while its chairman is suspended The Financial Supervisory Commission (FSC) yesterday fined Shin Kong Life Insurance Co (新光人壽) NT$27.6 million (US$939,415) for a reckless investment that endangered its solvency, and suspended its chairman Eugene Wu (吳東進) for poor supervision. The penalty is the second-highest in a single case after Nan Shan Life Insurance Co (南山人壽) was fined NT$30 million in September last year and its chairman Du Ying-tzyong (杜英宗) suspended for two years, the commission said. In three rounds of special and regular examinations conducted since last year, the commission found that Shin Kong Life had given too much power to an asset and liability management committee
HEAVY INVESTMENT: Moody’s affirmed the firm’s ‘Aa3’ rating with a ‘stable’ outlook due to its leading position in the industry and ability to match customer requirements Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) revenue this year is expected to increase about 21 percent to NT$1.29 trillion (US$44.01 billion) from NT$1.07 trillion last year, driven by strong demand for advanced 5-nanometer and 7-nanometer chips mainly used in smartphones and high-performance computing devices, a Moody’s Investors Service report on Wednesday said. TSMC’s rate of revenue growth next year is to increase to 7.5 percent, the ratings agency said. The company, which supplies 5-nanometer chips for Apple Inc’s new iPad series, has introduced the advanced chips ahead of its competitors and gained a significant share of the market for the foundry industry’s
Sony Corp has cut its estimated Play Station 5 (PS5) production for this fiscal year by 4 million units, down to about 11 million, following production issues with its custom-designed system-on-chip (SOC) for the new console, people familiar with the matter said. The Tokyo-based electronics giant in July boosted orders with suppliers in anticipation of heightened demand for gaming in the holiday season and beyond, as people spend more time at home due to the COVID-19 pandemic. However, the company has come up against manufacturing issues, such as production yields as low as 50 percent for its SOC, which have cut into
O2O BICYCLE SHOW: The Taiwan Bicycle Show next year is to be online to offline, with forums, audio-visual conferences and livestreaming of the offline events Local bicycle makers expect demand to continue outpacing supply due to orders triggered by the COVID-19 pandemic, with some companies seeing orders back up through next year. “Next year is all full in terms of orders. Our lead time on components is one year,” Giant Manufacturing Co Ltd (巨大機械) chairwoman Bonnie Tu (杜綉珍) told a news conference in Taipei organized by the Taiwan External Trade Development Council (TAITRA) to announce next year’s Taipei Cycle Show. The pandemic has reduced bicycle supplies and increased demand around the world, Robert Wu (吳盈進), chairman of KMC (Kuei Meng) International Inc (桂盟國際), one of the world’s