Saudi Arabia and the United Arab Emirates reiterated pledges to keep pumping the same amount of crude, blaming non-OPEC producers for the glut of oil that’s driven prices to the lowest in five years.
Suppliers from outside the Organization of Petroleum Exporting Countries should cut “irresponsible” output, U.A.E. Energy Minister Suhail Al Mazrouei said in Abu Dhabi yesterday. Even if non-OPEC producers were to offer cuts, OPEC probably wouldn’t follow suit, Saudi Oil Minister Ali Al-Naimi said. The biggest oil producers outside OPEC are the U.S. and Russia.
Oil fell about 20 percent since OPEC chose to maintain its production target at a Nov. 27 meeting, seeking to defend market share rather than prices. The highest U.S. crude output in at least three decades is contributing to a glut that Qatar estimates at 2 million barrels a day. Saudi Arabia is confident prices will rebound as economic growth boosts demand and “inefficient producers” trim output, Al-Naimi said.
“OPEC’s recent decision to leave production targets unchanged now places greater pressure on non-OPEC output to rebalance an oversupplied market,” analysts from ANZ Banking Group Ltd. including Melbourne-based Mark Pervan wrote in an e-mailed report. “Expanded production by all OPEC members next year would likely cause sharper falls in prices.”
OPEC produced more than its 30 million-barrel daily target in each of the past six months, data compiled by Bloomberg show. Non-OPEC production will expand 2.3 percent next year to 57.84 million barrels a day after climbing 3.5 percent this year, the International Energy Agency forecast in a Dec. 12 report.
“Irresponsible production from outside OPEC is behind the fall in prices,” Mazrouei said. “We call on all other producers to stop the increase.”
Saudi Arabia and the U.A.E. account for about 40 percent of OPEC supply.
Brent fell 1.7 percent to $60.34 a barrel on the London-based ICE Futures Europe exchange at 5:33 p.m. local time. West Texas Intermediate declined 2.8 percent to $55.52 in New York.
Crude tumbled into a bear market this year as oil extraction soared at shale formations in Texas and North Dakota as companies split rocks using high-pressure liquid, a process known as hydraulic fracturing, or fracking. Global demand has grown less quickly than expected this year, at about 700,000 barrels a day instead of the 1.2 million barrels projected, Al-Naimi said.
“The oil market will recover,” he said. “Fossil fuel will remain the main source of energy for decades to come.”
OPEC doesn’t intend to cut its output “whatever the price is,” Al-Naimi said in an interview with the Middle East Economic Survey. “Whether it goes down to $20, $40, $50, $60, it is irrelevant.”
Saudi Arabia has 265 billion barrels of oil reserves, according to the minister. The nation will increase refining capacity to 3.3 million barrels a day by 2017 from 2.1 million barrels in 2014, Al-Naimi said.
Russia’s crude oil output in 2015 will be similar to this year’s 10.6 million barrels a day, Energy Minister Alexander Novak said on Dec. 17. The country’s economy must brace for prices falling to $40 a barrel, President Vladimir Putin said the following day.
A drop in prices to less than $50 a barrel would be negative for the industry, Novak said today on state television Rossiya 24.
U.S. oil output is set to reach 9.42 million barrels a day in May, which would be the highest monthly average since November 1972, according to the Energy Department’s statistical arm. Oil companies, while trimming 2015 budgets to cope with the lowest crude prices in five years, are also shifting their focus to their lowest-cost fields, which means extracting more oil with fewer drilling rigs, said Goldman Sachs Group Inc.