It is too late for Opec to cut its output, the Saudi oil minister said yesterday, as a chorus of Arabian Gulf energy ministers blamed non-Opec producers for the collapse in the price of oil.
The comments emerged from a meeting of the Organisation of Arab Petroleum Exporting Countries in Abu Dhabi.
The gathering was held against a backdrop of global oil market volatility with the price of crude shedding almost half its value since the summer.
“I think it’s too late,” said Ali Al Naimi in reply to a question whether Opec would cut production if non-Opec producers offered to do so. “If they want to cut production they are welcome. We are not going to cut. Certainly Saudi Arabia is not going to cut.”
Oil futures rallied as much as 5 per cent on Friday as the market reacted to Mr Al Naimi, who described the drop in the price of crude as “temporary”.
The UAE Energy Minister, Suhail Al Mazrouei, echoed Mr Al Naimi's statements about Opec's November 27 decision to maintain output at 30 million barrels of oil per day (bpd), despite the economic troubles of Europe and Asia and the oil supply glut.
Mr Al Mazrouei said that the oversupply has not been the fault of Opec members.
“We should not and we will not interfere with the market fundamentals and do something that is a short fix. This is not going to happen.”
Mr Al Mazrouei said the sharp decline in prices had been fuelled by the “irresponsible production from some producers outside Opec, some of which are considered to be new to the oil market”.
“We think that the other producers will have to contain their future supply to the market to achieve this balance we hope to reach soon, and then the market will return to a gradual growth in the coming years,” he said.
"We call on everyone to do what Opec did, to take a role to balance the market by not suppling additional products to the market in 2015. If all comply with the Opec decision, the market will stabilise and stabilise quickly."
The Saudi oil minister also yesterday pointed the finger at non-Opec producers for driving prices lower in a trend that forced the price of crude below the level needed for some regional exporters to balance their budgets.
“Saudi Arabia and Opec countries have sought to restore balance to the market, but lack of cooperation from major non-Opec producing countries, combined with the greed of speculators, contributed to the continued decline in prices,” he said.
Opec pumps about a third of the world’s oil and last month produced 30 million barrels per day, according to secondary sources cited in Opec’s monthly report released on December 10.
Demand for Opec crude is estimated at 29.4 million bpd this year and is forecast to drop to 28.9 million bpd next year, the report said.
Non-Opec supply was expected to have grown by 1.7 million bpd this year to average 55.9 million bpd. Next year it is forecast to increase by 1.3 million bpd to average 57.3 million bpd, according to the report.
The United States alone has increased its shale oil production to more than 9 million bpd from 5 million bpd in 2008 and is expected to grow by about 700,000 bpd next year.
Mr Al Mazrouei added that the current drop in oil prices would be “a big economic burden” on Arab oil exporting countries.
Mr Al Naimi said: “Currently prices do not encourage investment in any form of energy, but they stimulate global economic growth, leading ultimately to an increase in global demand and a slowdown in the growth of supplies.”
He added that it was likely that countries with high production costs would be unable to increase output.
But the Saudi minister said that the oil price drop would have little impact on the economy of Saudi Arabia, the world’s biggest oil exporter, because of its strong currency and financial reserves.
Qatar’s oil minister, Mohammed Al Sada, blamed the oil price drop on a global economic slowdown and said that prices were going through a temporary correction.
Last month, Saudi Arabia slashed premiums to US customers while increasing them to Asian and European customers, a move seen by many as an effort to squeeze US shale producers.
The rapid decline of oil prices has raised the rhetoric among producers in recent weeks as the economic fallout from the decline begins to be felt across the region.
The Iranian president, Hassan Rouhani, earlier this month blamed unnamed countries for plotting to bring down crude prices and said that the oil rout was not based on solely economic factors.
Yesterday the Saudi petroleum minister defended the kingdom’s energy policy.
“Recently, a number of articles and reports claimed that Saudi Arabia is engaged in a conspiracy, using oil prices, to undermine other oil producers and non-conventional suppliers,” Mr Al Naimi said. “Certainly, such claims are baseless and indicate a lack of understanding, deliberate misjudgement or otherwise. Saudi Arabia’s oil policy is predicated on mere economics, no more, no less.”
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