Russia Says Saudi Arabia Destabilized Oil Market

Russian Energy Minister Alexander Novak said that Saudi Arabia has destabilized oil market by increasing its production by 1.5 million barrels a day.

Tass reported that Mr. Novak in an interview with Rossiya 24 TV channel said, "This year Saudi Arabia has ramped up production by 1.5 mln barrels per day, which in fact destabilized the situation on the market." He also said that, "According to experts' estimates, demand-and-supply curves may coincide in the second half of 2016, which will balance the market."

Since last year, oil price fell sharply from $105 to below $40 per barrel as per now. There are many reasons for the declining price, and the market competition is the main factor. In 2011, American invented a shale oil production technology. This technology enable oil extraction from unyielding shale rocks and increasing American oil output.

The invention of shale oil has created a balance of power in the global energy. Saudi Arabia as a leading producer of world's oil can no longer enjoy its monopoly and control over oil price. In an effort to drive out the competition from U.S. oil, Saudi Arabia increased its oil production and flood the market.

However, the strategy backfired as other members of OPEC wanted to lower the production to increase the price and stabilize the market. The decline of oil price has reduced the OPEC revenue by $500 billion. Last month, some analysts predicted that oil price could go even lower to $20 per barrel.

Up to now, according to United Press International, Brent crude oil prices are down 36 percent from this time last year and continue to hold beneath $40 a barrel. High supply, despite the lower price for crude oil, and weak demand are putting more pressure on the markets. Another pressure from Iran's new oil production also put more tension to oil price.

However, Russian Deputy Prime Minister Arkady Dvorkovich told Rossiya-TV that the low oil price will not stay for long. '"For some time, any company, any producing country is able to sustain such low prices," he said. "But then investment will inevitably go down, which means that production will fall and prices will rise."

Robert McNally, founder and president of The Rapidan Group wrote a commentary in CNBC that OPEC has started to lose its grip on oil price 10 years ago. From Brent' spike to $146 a barrel in 2008, and the collapse to $36 showed that OPEC has lost control of the oil price.

Regardless of the competition of oil production, both OPEC and non-OPEC oil producers are the losing sides with the continuous decline of oil price.