OPEC’s leader has vowed that the oil cartel will not cut output even if the price of crude falls to US$20 a barrel.
Ali al-Naimi, the Saudi oil minister, signaled an end to the traditional strategy of the Organization of the Petroleum Exporting Countries, which was to maintain prices by curbing oil output.
The cartel’s new policy is to defend its market share at all costs, the Financial Times reported, citing an interview Naimi gave to the Middle East Economic Survey.
“It is not in the interest of OPEC producers to cut their production, whatever the price is,” he told MEES. “Whether it goes down to US$20, US$40, US$50, US$60, it is irrelevant.”
Naimi said the world may never see US$100 a barrel oil again.
It is a “fundamental change” in OPEC policy that is more far-reaching than any seen since the 1970s, the FT quoted Jamie Webster, an oil analyst at IHS Energy, as saying.
“We have entered a scary time for the oil market, and for the next several years we are going to be dealing with a lot of volatility,” he said. “Just about everything will be touched by this.”
Analysts say Saudi Arabia is throwing down the gauntlet to all the high-cost sources of crude — from the oil sands of Canada and US shale to deepwater Brazil and the Arctic — in an attempt to face down the threat they pose to its market share, the newspaper said.
Naimi said that if the kingdom reduced its production, “the price will go up, and the Russians, the Brazilians, US shale oil producers will take my share”.
He said Saudi Arabia and other Gulf oil producers will be able to withstand a long period of low crude prices, because their production costs are so low — only about US$4-US$5 a barrel.
But he said the pain will be much greater for other oil regions, such as offshore Brazil, west Africa and the Arctic, whose costs are much higher.
“We want to tell the world that high-efficiency producing countries are the ones that deserve market share,” Naimi said. “If the price falls, it falls … Others will be harmed greatly before we feel any pain.”
Oil has slumped by nearly 50 per cent since mid-June amid a supply glut due to a surge in US shale output that has come as demand for crude has weakened in Europe and Asia.
But the plunge in the oil price could have a silver lining for the global economy.
The International Monetary Fund said Monday that a prolonged price slump could boost global growth by up to 0.7 per cent next year and 0.8 per cent in 2016.
China would be the biggest beneficiary, with its GDP boosted by up to 0.7 per cent next year and 0.9 per cent in 2016.
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