Saudi Arabia Won’t Come to Oil’s Rescue

But world’s largest oil exporter will continue to work with other oil states to forge agreement to steady production while demand catches up.

Ali al-Naimi, Saudi Arabia’s petroleum minister

Saudi Arabia delivered its starkest message yet to a reeling global oil sector, saying it wouldn’t rescue the industry from low prices by cutting its production.

Ali al-Naimi, Saudi Arabia’s powerful petroleum minister, told the elite of the global energy industry here Tuesday that demand for oil remains strong but that for prices to recover, excess supply will still need to be curbed. That rebalancing, he said, will start as low prices squeeze out the production of oil that is the most expensive to extract and sell.

That production comes from places including U.S. shale fields, Canada’s oil sands and deepwater projects that attracted investment during the years oil was priced over $100. Now it is closer to $30.

Mr. Naimi’s message is a shot across the bow for an industry already struggling to adjust to a price drop of more than 70% since June 2014, to a level at which many producers can’t survive.

Never before has Mr. Naimi, who has dominated Saudi oil policy for two decades, laid out so bluntly the Kingdom’s vision for how the industry should adjust to market conditions. New sources of supply are converging with pressures on oil demand created by China’s slowing economy, growing energy efficiency and, eventually, new power sources such as solar and wind.

“The producers of these high-cost barrels must find a way to lower their costs, borrow cash or liquidate,” Mr. Naimi told the IHS CERAWeek gathering, which included top executives from many of the world’s biggest oil companies and senior officials from big producing countries.

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