Saudi Arabia can cope with low oil prices for “at least eight years”, a former longstanding adviser to the kingdom’s oil minister has said.
Mohammad Al Sabban, who advised the kingdom on oil policy for 27 years until 2014, told the BBC the kingdom was “worried” about the sustained low prices but its policy was to maintain market share.
“Saudi Arabia can sustain these low oil prices for at least eight years,” Sabban told the BBC’s World Business Report.
“First, we have huge financial reserves of about 3 trillion Saudi riyals ($799 billion). Second, Saudi Arabia is embarking now on rationalising its expenditure, trying to take all the fat out of the budget.
“I think [Saudi Arabia] is worried but we [have to] wait for the full medicine that we have prescribed for ourself to take its course.”
Al Sabban said the kingdom would be limited to four years of low oil prices if it did not reduce spending.
It has announced tens of billions of riyals worth of infrastructure projects as it used the increased oil revenues to improve the country but is already working to review its budget.
Saudi Arabia has refused to cut oil production despite prices falling by about 60%, to less than $50 per barrel, since June.
Al Sabban said the kingdom would wait out as long as possible in a bid to push shale oil producers out of the market.
“To shorten the cycle, you need to allow prices to go as low as possible to see those marginal producers move out of the market on the one hand, and also if there is any increase in demand that will be welcomed,” he said.
A planned meeting between Saudi Arabia’s foreign minister and his Iranian counterpart for this week was postponed partly because of disagreement over the falling oil price, Bloomberg reported.
Iran claims Arab states are leading an international plot to weaken Tehran by forcing down the price of oil.
