An oil price of around $80-90/bl is fair in today's oil market, according to Kuwaiti state-owned KPC's managing director of international marketing Sheikh Khaled Ahmad al-Sabah.
Speaking with Gulf Intelligence in an interview published today, al-Sabah said that with current oil market dynamics, oil prices in the $50-60/bl range are neither feasible, nor realistic.
"Nowadays, the market has to accept that prices in the $50s or $60s are no longer there," he said. "With the political situation ꟷ because we now have supply and demand, but also a political influence on prices ꟷ putting all those into the equation, I think $80-90/bl is really, the just and fair price, for the market."
Front month Ice Brent futures are now trading at above $92/bl, after having last week breached the $90/bl mark for the first time since November 2022 following announcements by Saudi Arabia and Russia that they would be extending their additional crude supply cuts until the end of 2023.
Al-Sabah dismissed the idea that current oil prices are "very high", saying that the market has largely been "accepting these kinds of prices." Looking ahead, though, despite signs pointing to further tighter balances in the fourth quarter, he said he did not expect oil prices to rise much beyond current levels.
Opec, in its latest monthly oil market outlook issued on 12 September, showed that the market could be more than 3mn b/d in deficit if Opec maintained its production at current levels through the end of the year.
Echoing many other energy officials in the Mideast Gulf, al-Sabah lamented the continued lack of investment in the upstream by countries outside Opec and Opec+, despite today's higher oil prices.
He said producers outside the group need to follow Mideast Gulf producers' lead and direct more funding towards building their upstream oil and gas capacity.
Saudi Arabia is several years into a plan to boost its crude oil production capacity to 13mn b/d by 2027 from around 12mn b/d today, while the UAE is building its crude capacity to 5mn b/d, also by 2027, from around 4.5mn b/d today.
Kuwait is working towards expending its own crude capacity, including its share of the Neutral Zone, to 3.5mn b/d by 2025 and 4mn b/d by 2035, from just shy of 3mn b/d today. But al-Sabah said today that the company is on track to reach its 4mn b/d target "ahead of that [2035] date".
Changing flows
The sanctions imposed on Russia as a result of its invasion of Ukraine triggered a shift in global energy flows as Moscow tried to find new markets for its crude.
China and India have been the largest beneficiaries of the western-led sanctions, openly taking significantly larger volumes of discounted Russian crude, while many Mideast Gulf producers have been redirecting some volumes to Europe to replace the barrels that used to come from Russia.
Al-Sabah acknowledged that the invasion "has impacted the oil market heavily", with India and China now emerging as "a baseload buyer" for Russian crude grades. "We have seen massive quantities going to India, and I am sure this has been displacing other grades."
Vortexa shows India imported 1.8mn b/d of crude from Russia in the first eight months of this year, up from just 108,000 b/d in the corresponding period of 2021, while Chinese imports from Russia averaged 1.43mn b/d in January-August this year, almost double the 766,000 b/d of Russian crude over the same months in 2021.
Looking ahead, al-Sabah said he expects flows to gradually return, at least partially, to the way they were historically, before the start of the invasion.
"This fear that those [significant] volumes will be permanently [flowing to China and India] ꟷ I think we are overestimating the situation… because there is always a formula for marketing the oil," he said. "Economics will always win, credibility [of the supplier] will always win. The relationships are always there."
Al-Sabah said that despite the increased Russian flows to both these Asian markets, Kuwait has managed to maintain its market share in both. "We are still receiving good demand from the two, especially China," he said.
But Vortexa data shows Kuwait's exports to China averaged 497,000 b/d in January-August this year, 17pc down from 599,000 b/d in 2022, while at 169,000 b/d its exports to India over the first eight months of this year were down by 24pc versus 223,000 b/d last year.
