Production cut 'not going to happen': Saudi oil minister

Saudi Arabia's oil minister has said that he was confident more nations would join a pact to freeze crude output at existing levels in talks expected next month, but ruled out production cuts by major crude producers anytime soon.

Ali al-Naimi told global energy executives gathered in Houston on Tuesday that growing support for the freeze and stronger demand should over time ease a global glut that has pushed oil prices to their lowest levels in more than a decade.

The Saudi minister also said during a Q&A session that the lack of trust between OPEC players meant that a production cut was "not going to happen".

Instead, he said Saudi Arabia would push for the co-ordinated freeze in production announced last week.

"A freeze is the beginning of a process. If we can get all the major producers to agree not to add additional barrels then this high inventory we have now will probably decline in due time," Naimi said, emphasising that markets should not view the recent agreement as a prelude to production cuts.

"Even if they say that they will cut production they will not do it. There is no sense in wasting our time seeking production cuts. They will not happen."

The minister denied that the kingdom was waging a war with high-cost shale oil producers in the US, but also warned them to either cut costs or face bankruptcy.

A freeze is the beginning of a process. If we can get all the major producers to agree not to add additional barrels then this high inventory we have now will probably decline in due time. - Ali al-Naimi

"The producers of these high-cost barrels must find a way to lower their costs, borrow cash or liquidate," he said.

"It sounds harsh, and unfortunately it is, but it is a more efficient way to rebalance markets," he added.

"Cutting low-cost production [such as Saudi Arabia's] to subsidise higher-cost supplies only delays an inevitable reckoning."

Last week, Saudi Arabia, Qatar, Russia and Venezuela agreed to freeze production at January levels, provided other major producers agreed.

"Freezing now at the January level is adequate for the market, we believe," Naimi said at the time.

However, Iran's oil minister called the plan "laughable", according to an Iranian news agency report on Tuesday.

But Naimi did not address the issue of super-rival Iran, which it sees as the biggest obstacle to a global deal to limit crude production, as Tehran focuses on ramping up output after years of sanctions.