Qatar’s Minister of Energy and Industry HE Dr Mohamed bin Saleh al-Sada arrives at the hotel yesterday prior to the start of the 166th Opec meeting in Vienna. Opec’s meeting today will be one of its most crucial in recent years, with oil having tumbled to below $78 a barrel due to the US shale boom and slower economic growth in China and Europe.
Saudi, UAE say oil market will eventually stabilise; Iran sees oil glut growing next year; Iran says some Opec members want to battle for market share ; UAE, Iran say non-Opec should participate in any cut
Opec leader Saudi Arabia and fellow member the UAE signalled yesterday they were unlikely to push for a major change in oil output at the group’s meeting today to prop up prices that have sunk by a third since June.
Saudi Oil Minister Ali al-Naimi said he expected the oil market “to stabilise itself eventually”, after talks with non-Opec member Russia on Tuesday yielded no pledge from Moscow to tackle a global oil glut jointly.
Opec’s meeting today will be one of its most crucial in recent years, with oil having tumbled to below $78 a barrel due to the US shale boom and slower economic growth in China and Europe.
Core Gulf oil producer the UAE sided with al-Naimi, saying oil prices would soon stabilise, while ramping up pressure on non-Opec producers.
“This is not a crisis that requires us to panic ... we have seen (prices) way lower,” UAE Oil Minister Suhail bin Mohammed al-Mazroui told Reuters. “I think everyone needs to play a role in balancing the market, not Opec unilaterally”.
Iranian Oil Minister Bijan Zangeneh said some Opec members, although not Iran, were now gearing up for a battle over market share and he insisted that producers outside the group needed to participate in any Opec-led output cut.
“Some Opec members believe that this is the time where we need to defend market share ... All the experts in the market believe we have oversupply in the market and next year we will have more oversupply,” he added.
Cutting output unilaterally would effectively mean for Opec, which accounts for a third of global oil output, a further loss of market share to North American shale oil producers.
If Opec decided against cutting and rolled over existing output levels today, that would effectively mean a price war that the Saudis and other Gulf producers could withstand due to their large foreign-exchange reserves. Other members, such as Venezuela, would find it much more difficult.
Among the 12 members of the Organisation of the Petroleum Exporting Countries, Venezuela and Iraq have called for output cuts.
Opec’s traditional price hawk Iran said yesterday its views were now close to those of Saudi Arabia as Zangeneh said he had an “excellent” meeting with Naimi.
Al-Naimi has not commented on what the group should do.
“The onslaught of North American shale oil has drastically undermined Opec’s position and reduced its market share,” said Dr Gary Ross, chief executive of PIRA Energy Group.
Russia, which produces 10.5mn bpd or 11% of global oil, came to Tuesday’s meeting amid hints it might agree to cut output as it suffers from oil’s price fall and Western sanctions over Moscow’s actions in Ukraine.
But as that meeting with Naimi and officials from Venezuela and non-Opec member Mexico ended, Russia’s most influential oil official, state firm Rosneft’s head Igor Sechin, emerged with a surprise message - Russia will not reduce output even if oil falls to $60 per barrel.
Sechin added that he expected low oil prices to do more damage to producing nations with higher costs, in a clear reference to the US shale boom. Yesterday, Russian Energy Minister Alexander Novak said he expected the country’s output to be flat next year.
Many at Opec were surprised by Sechin’s suggestion that Russia - in desperate need of oil prices above $100 per barrel to balance its budget - was ready for a price war.
“Gulf states are less bothered about a price drop compared to other Opec members,” an Opec source close to Gulf thinking said. Opec publications have shown that global supply will exceed demand by more than 1mn bpd in the first half of next year.
While the statistics speak in favour of a cut, the build-up to the Opec meeting has seen one of the most heated debates in years about the next policy step for the group.
An Opec delegate from one of the smaller oil producers suggested yesterday that the group’s meeting could be prolonged:
“They must agree, even if they have to stay here for two days. It is a matter of death or survival for budgets,” the delegate said. “It might take a bit longer than the ordinary meetings.”
