DOHA: Long-term oil market fundamentals remain robust but prolonged low prices could threaten security of supply and pave the way for a price spike, Saudi Arabia’s vice oil minister said on Monday.

The world’s largest crude exporter will continue investing in its oil and gas sector, Prince Abdulaziz bin Salman said in a speech at an Asian energy conference in the Qatari capital Doha.

“Supply and demand patterns indicate that the long-term fundamentals of the oil complex remain robust,” he said.

The comments suggest Opec heavyweight Saudi Arabia is satisfied with its strategy of not cutting production and allowing low prices to reduce supplies, without losing market share to competitors.

Oil prices, at around $47 a barrel, have more than halved since July 2014 on ample supplies.

The Organisation of the Petroleum Exporting Countries (Opec) meets to review policy on Dec 4. Two other Opec officials on Monday made upbeat comments about the 2016 outlook, suggesting big changes are unlikely.

Prince Abdulaziz said cuts in oil industry investment elsewhere in the world would lead to a drop in crude supplies from non-Opec countries in 2016 and beyond that was unlikely to be reversed. Meanwhile, growth in demand fuelled mainly by Asia would remain strong, though slower than in the past.

“Non-Opec supply is expected to fall in 2016, only one year after the deep cuts in investment,” he said.

“Beyond 2016, the fall in non-Opec supply is likely to accelerate, as the cancellation and postponement of projects will start feeding into future supplies, and the impact of previous record investments on oil output starts to fade away.”

Prince Abdulaziz said a prolonged period of low oil prices was unsustainable, warning it could “reduce the resilience of the oil industry, undermining the future security of supply and setting the scene for another sharp price rise”.

“Just as the assertions, heard a few years ago — that the oil price would reach $200 a barrel — were proved wrong, so the recent assertion that the oil price has shifted to a new low structural equilibrium will also turn out to have been wrong.”

CONTINUING TO INVEST: Oil companies around the world have deferred some $200 billion worth of projects including complex, expensive ventures that hold huge resources, such as Canadian oil sands and deepwater projects in Africa and southeast Asia.

But Saudi Arabia appears keen to send a message to the market that it is moving ahead with its oil and gas projects.

“As a responsible and reliable producer with a long-term horizon, the kingdom is committed to continue to invest in its oil and gas sector, despite the drop in the oil price,” Prince Abdulaziz said.

While Saudi Arabia sees a robust market over the long term, Opec has yet to complete a review of its long-term strategy as members disagree about the need to support a fair price and boost revenue, delegates say.

Opec governors — officials representing the member countries — met last week at the group’s Vienna headquarters to discuss the latest draft of the long-term strategy document.

“We have not yet finished, next year maybe,” said one delegate. “We need more time. It won’t be discussed at the conference in December.”

Published in Dawn, November 10th, 2015