Al-Badri: No need to panic over oil price slide
Al-Badri: No need to panic over oil price slide
Abdullah Al-Badri also said output of higher-cost oil supplies such as shale would be curbed if oil remained at around $85 a barrel, while the Organization of the Petroleum Exporting Countries enjoys lower costs and will see higher demand for its crude in the longer term.
Oil’s drop below the $100-mark, the level many OPEC members had endorsed, has raised the question of whether OPEC will cut supply when it meets in November. Al-Badri said OPEC’s output was unlikely to change much next year, adding to signs a decision to cut in November is unlikely.
“I don’t think 2015 will be far away from 2014 in terms of production,” Al-Badri told reporters in London at the annual Oil & Money conference. “There is nothing wrong with the market.”
Brent crude has dropped more than a quarter from above $115 per barrel in June as abundant supplies of high-quality oil such as US shale have overwhelmed demand in many markets, filling stocks worldwide.
But lower prices pose a threat to supply outside OPEC. While OPEC’s oil production costs are low, as much as half of shale output would be under threat if prices remain at current levels, Al-Badri said.
“If prices stay at $85, we will see a lot of investment, a lot of oil, going out of the market,” he told the conference. “About 65 percent of the producers, they have high costs. Not OPEC.”
Al-Badri did not predict the outcome of OPEC’s meeting on Nov. 27, saying the decision was up to the group’s oil ministers, and appealed for calm over the decline in prices.
“We do not see much change in the fundamentals. Demand is still growing, supply is also growing. OPEC is reviewing the situation,” he said.
“The most important thing is we should not panic,” he said. “Unfortunately, everybody is panicking. We really need to sit, and think and see how this will develop.”
He dismissed suggestions that OPEC countries, in setting lower official selling prices for their crude oil, have embarked on a price war to preserve market share.
Al-Badri declined to specify a level at which oil prices might find a floor, saying OPEC did not have a price target but would instead leave that to the market.
“OPEC’s average price will still be $100 at the end of this year so we are fine for 2014,” he said.
“The fundamentals do not reflect this low price.”
“OPEC does not have a price target. We must let the market settle down.”
Brent was trading around $87.30 by 1430 GMT after reaching a four-year low of $82.60 two weeks ago.
Al-Badri said last month that he expected OPEC to lower its oil output target when it meets in Vienna, which would be its first formal output cut since the 2008 financial crisis.
OPEC has a production target of 30 million barrels per day (bpd) and Badri suggested last month that this should be cut to around 29.5 million bpd.
Since then, OPEC members Iran and Kuwait have said a cut in output at the meeting was unlikely. Saudi Arabia has yet to comment publicly.
Al-Badri reiterated that supplies from rival producers, such as shale oil, were not a threat to OPEC long-term and said OPEC had to be ready to pump far more in future.
“In the longer term, OPEC must be ready to produce. Around 2018-2020, US tight oil will slow down,” he said. “By 2040, OPEC must be ready to produce 40 million bpd of oil, and 50 million bpd of liquids, that’s crude and natural gas liquids.”
Volvo quits Iran as US sanctions pressure mounts
- Volvo cannot get paid in Iran due to US sanctions
- Plans were for at least 5,000 trucks to be assembled in Iran Saipa Diesel says zero Volvo trucks assembled since May
STOCKHOLM, Sweden: Swedish truck maker AB Volvo has stopped assembling trucks in Iran because US sanctions are preventing it from being paid, a spokesman for the company said on Monday.
The sanctions against Iran, reimposed on Aug. 6 by US President Donald Trump after his decision to pull out of a nuclear deal with Tehran, have forced companies across Europe to reconsider their investments there.
Volvo spokesman Fredrik Ivarsson said the trucks group could no longer get paid for any parts it shipped and had therefore decided not to operate in Iran in another blow to the country’s car industry, which unlike the energy and banking sectors, had managed to sign contracts with top European firms.
“With all these sanctions and everything that the United States put (in place) ... the bank system doesn’t work in Iran. We can’t get paid ... So for now we don’t have any business (in Iran),” Ivarsson told Reuters by telephone.
Before the sanctions were reimposed, Volvo had expressed an ambition for Iran to become its main export hub for the Gulf region and North Africa markets.
The European Union has implemented a law to shield its companies, but the sanctions have deterred banks from doing business with Iranian firms as Washington can cut any that facilitate such transactions off from the US financial system.
Volvo was working with Saipa Diesel, part of Iran’s second-largest automaker SAIPA, which was assembling the Swedish firm’s heavy-duty trucks from kits shipped to Iran.
Ivarsson said Volvo had no active orders in Iran as of Monday.
A commercial department manager at Saipa Diesel confirmed that sanctions had prompted Volvo Trucks to terminate their partnership agreement.
“They have decided that due to the sanction on Iran, from (May) they couldn’t cooperate with us. We had some renovation planned in Iran for a new plant but they refused to work with us,” said the manager, who declined to be identified.
More than 3,500 Volvo trucks had been assembled by Saipa Diesel in the year to May, but none had been assembled in this financial year although the original deal was for at least 5,000 trucks, the manager told Reuters.
Swedish truckmaker Scania, which is owned by Volkswagen , said it had canceled all orders that it could not deliver by mid-August due to sanctions, while French carmaker PSA Group began to suspend its joint venture activities in Iran in June.
Germany’s Daimler has said it is closely monitoring any further developments, while carmaker Volkswagen has rejected a report that suggested it had decided against doing business in Iran.