The oil ministers of Saudi Arabia and the United Arab Emirates have defended Opec’s decision not to cut production despite a glut, and blamed speculators and producers outside the cartel for the slump in prices.
Both stuck to their stance of keeping production at current levels, expressing hope that the market would stabilise on its own. Oil prices have nearly halved in the past six months, with the international benchmark Brent crude falling below $60 a barrel last week, the lowest in more than five years.
The Saudi oil minister, Ali al-Naimi, said in Abu Dhabi on Sunday: “The kingdom of Saudi Arabia and other countries sought to bring back balance to the market, but the lack of cooperation from other producers outside Opec and the spread of misleading information and speculation led to the continuation of the drop in prices.”
Referring to producers outside Opec, he said: “If they want to cut production, they are welcome: We are not going to cut; certainly Saudi Arabia is not going to cut.” He said he was “100% not pleased” with prices but was confident they would improve, although it was unclear when.
He denied allegations that the kingdom was conspiring to bring oil prices down to harm its neighbours. Asked about possible cooperation between Opec members and other producers, he said: “The best thing for everybody is to let the most efficient producers produce.”
An Opec meeting last month failed to agree on production cuts, mainly because of Saudi opposition. The cartel kept its target output of 30m barrels a day unchanged, a shift from its traditional policy which has seen Saudi Arabia act as a swing supplier. It is the largest producer in Opec, which controls about 40% of the global oil market.
Speaking at the same summit, the UAE’s oil minister, Suhail Bin Mohammed al-Mazroui, said one of the main reasons for the fall in prices was “the irresponsible production of some producers from outside Opec”. He reiterated that “Opec is not a swing producer” and “it’s not fair that we correct the market for everyone else”.
Kuwaiti oil minister Ali al-Omair also saw no need for Opec production cuts or an emergency meeting before its next scheduled talks in June. His Iraqi counterpart, Adel Abdul Mahdi, said the cartel would have to “wait and see” whether it was right to keep its output unchanged.
Naimi argued the slide in oil prices would help the world economy. “Current prices do not encourage investment in any form of energy, but they stimulate global economic growth, leading ultimately to an increase in global demand and a slowdown in the growth of supplies,” he said.
Lower oil prices have driven UK petrol prices down, bringing relief to consumers. The average price of unleaded fuel has fallen to 116.32p a litre from 122.93p a litre in mid-November, the AA reported on Friday, giving a family with two cars an average boost of at least £15 to their spending power in December.
Kevin Daly, a senior Goldman Sachs economist recently predicted the petrol price would drop to close to £1 a litre in the coming months if oil prices stayed low.
The world is expected to need less Opec oil in 2015 because of the increasing supply of US shale oil and other sources, with no significant rise in world demand expected.
The slump in oil prices has triggered various conspiracy theories, including suggestions that Riyadh is seeking to damage the US fracking industry or looking to undermine Iran and Russia in response to their support for Syria.
Russia, the world’s second-largest oil exporter after Saudi Arabia, also dashed hopes it might cut production after Opec’s meeting in Vienna last month.
Holger Schmieding and Christian Schulz at Berenberg Bank argued last week that cheap oil was a “game-changer”, with the benefits far outweighing the disadvantages.
“If oil prices remain close to current levels, the western world and many emerging markets can look forward to benefiting from a big de facto tax cut. Even better, the tax cut will be paid for by Russia and the Middle East.”
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