Saudis bridle against calls for oil production cutback
THE Organisation of the Petroleum Exporting Countries (Opec) will not cut production, Saudi Arabia says.
The world’s top oil producer added it would not cut the price of crude even if it dropped to $US20 a barrel, and that it was unfair to expect the cartel to reduce output if non-members did not, it added.
‘‘Whether it goes down to $US20 a barrel, $US40, $US50, $US60, it is irrelevant,’’ the kingdom’s Oil Minister Ali al-Naimi said in an interview with the Middle East Economic Survey (Mees), an indus- try weekly. In unusually detailed comments, Naimi defended a decision by the Opec, whose lead producer is Saudi Arabia, in November to maintain a production ceiling of 30 million barrels per day.
The decision sent global crude prices tumbling, worsening a price drop that has seen them fall by around 50 per cent since June.
Saudi Arabia has traditionally acted to balance demand and supply in the global oil market because it is the only country with substantial spare production capacity, according to the International Monetary Fund.
The kingdom pumps about 9.6 million barrels per day but Naimi said it was ‘‘crooked logic’’ to expect his country to cut and then lose business to other major producers outside OPEC.
The increasingly competitive global oil market has seen daily United States oil output rise by more than 40 per cent since 2006, but at a production cost which can be three or four times that of extracting Middle Eastern oil.
‘‘Is it reasonable for a highly efficient producer to reduce output, while the producer of poor efficiency continues to produce?’’ Naimi asked during the interview with MEES.
‘‘If I reduce, what happens to my market share? The price will go up and the Russians, the Brazilians, US shale oil producers will take my share.’’
He added that it was ‘‘unfair’’ for the cartel to reduce output because it was not the world’s major oil producer.
‘‘We produce less than 40 per cent of global output. We are the most efficient producer. It is unbelievable after the analysis we carried out for us to cut.’’
World oil prices resumed their downward trajectory yesterday. US benchmark West Texas Intermediate for February delivery dropped $US1.28 to $55.84 a barrel on the New York Mercantile Exchange. In London, Brent oil for February delivery fell $US1.70 to $59.99 a barrel.