Saudi Arabia convinced its fellow OPEC members that it was not in the group’s interest to cut oil output however far prices may fall, the kingdom’s oil minister Ali al-Naimi said in an interview with the Middle East Economic Survey (MEES).
OPEC met Nov. 27 and declined to cut production despite a slide in prices, marking a shift in strategy toward defending market share rather than supporting prices.
“As a policy for OPEC, and I convinced OPEC of this, even Mr al-Badri (the OPEC secretary general) is now convinced, it is not in the interest of OPEC producers to cut their production, whatever the price is,” Naimi was quoted by MEES as saying.
“Whether it goes down to $US20, $US40, $US50, $US60, it is irrelevant,” he said.
He said the world “may not” see oil back at $US100 a barrel, formerly Saudi Arabia’s preferred level for prices, again.
Oil fell towards $US60 a barrel on Monday, reversing gains after Saudi Arabia indicated it could increase its output.
Monday’s edition of the Saudi-owned al-Hayat newspaper quoted the kingdom’s oil minister Naimi as saying Saudi Arabia is prepared to increase output and gain market share by meeting the demands of any new customers.
On Sunday he said lower crude prices would help demand by stimulating the economy.
Brent fell 72 cents to $US60.66 by 1415 GMT. It is down more than 46 per cent from the year’s peak in June above $US115 per barrel. U.S. crude was down 84 cents at $US56.29 a barrel.
“We are going down because you have some OPEC ministers who come every day making statements trying to drive the market down, said Olivier Jakob, an oil analyst at Petromatrix Oil in Zug, Switzerland.
“They come every day to convey the message that they are not doing anything to restrict supplies and that they basically want oil prices to move lower to reduce production in the U.S.”
OPEC’s decision not to reduce production at a meeting in November sped up the decline in already falling oil prices. Prospects for a cut in the near future look remote.
While analysts said Brent would likely remain above $US60 a barrel this year, they said further large jumps in price were unlikely.
Analysts said the price drop would have only a gradual impact on the outlook for production.
“Given the lead time in permit approval and rig construction ahead of oil production, a sizeable negative U.S. supply response given the price drop is unlikely to take place until late 2015, which places further downward pressure on oil prices in the first six months of next year,” National Australia Bank said in a note.
It said it expected Brent and U.S. crude to average $US68 and $US64 per barrel respectively in 2015.
Analysts also said they expected relatively low price volatility for the rest of the year as traders begin to wind down their 2014 positions.
(Additional reporting by Henning Gloystein in Singapore and Ahmed Aboulenein in London; editing by Jason Neely, David Evans, and Jane Merriman)
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